• Been a stanch treasury bear since April - see previous posts/comments for verification
• Recent indications 10Y futures may have CTAs close short positioning, thus selling of note futures coming to an end (yields peaked) - I would not rely on this to be a sustainable indicator of trend reversal; may indeed be true, but calling the end of this yield rally is a bit premature on this single factor.
• For a long-term approach, it is my view that to value to 10Y yield requires a denominator: annualized savings (DPI less PCE) as a percentage of monetary base. The 10-year median of the 10-year nominal yield and Annualized Savings to Monetary Base Ratio has a R2=0.98. See link. Chart implies a fair value in/around 10Y of 2.25-2.75%, but this number is a moving target.
• The Fed may enact YCC, however current developed Central Bank enacting this policy are looking to struggle with managing their curves given recent reports (Australia, Japan)
• More fixated on US corporate credit at the moment than the treasury yield curve - HY vs IG OAS, Single-A vs CCC and below total return, etc - all reinforce strength in credit markets, but when/where might that end given treasuries and curve?
Submitted February 26, 2021 at 11:27PM by NegativeTangibleBook https://ift.tt/3krmLM6
