3 Jul 2013
Flash: US rates poised for correction – RBS
FXstreet.com (New York) - “There are widespread signs that investors are now defensively positioned for higher rates.” notes the RBS Research Team.
Medium-term momentum signals are deeply oversold for US rates, trader sentiment is exceptionally bearish on bonds (just 8% bulls for US bond futures last week), net longs in the JPM survey had their biggest plunge in 2yrs and Put/Call ratios are also at extremes (puts over calls in FV, TY and US futures) not seen since February 2011 when 10-years pressed up toward 3.75% - just before a massive rally.
According to the team, “Given all this, the skew of risk in rates now tilts heavily toward lower rates as we appear to be running out of sellers. A bullish turn in weekly momentum studies will confirm that a bullish correction to lower rates has begun.”
Medium-term momentum signals are deeply oversold for US rates, trader sentiment is exceptionally bearish on bonds (just 8% bulls for US bond futures last week), net longs in the JPM survey had their biggest plunge in 2yrs and Put/Call ratios are also at extremes (puts over calls in FV, TY and US futures) not seen since February 2011 when 10-years pressed up toward 3.75% - just before a massive rally.
According to the team, “Given all this, the skew of risk in rates now tilts heavily toward lower rates as we appear to be running out of sellers. A bullish turn in weekly momentum studies will confirm that a bullish correction to lower rates has begun.”