CTA Treasury Bond Article on Zhedge

Just wanted to comment as a CTA about this article. We do like the fact that they highlight the 2s10 Yield Curve as well as the speculative positioning in the the 30Y. A lot of CTAs have begun selling and that is why we have seen the recent rise in yields.

However a breakout would need some other sort of catalyst, not just technical, as we believe technically and something we pointed out earlier this morning in our note, that US 10Y Yields near the 85bp level or 0.85% should see some consolidation or even a reversal perhaps. Here is the charts of the 2s10 and 30Y specs that Zhedge posted:

Now the specs have clearly added some chips, but anytime we see this highlighted we have to ask if the not so obvious is now obvious…meaning the bulk of the move may be over and now might be a good time to fade things a bit.

If we were big enough and had access to all the quant data and had soldiers on the street with their eyes and ears peeled, we would bet we could see just whose late to the party here and is the weakest hand. Any way give the article a read and digest things. We may post some bond basis charts to see if anything piques our interest there and can corroborate with what has transpired in US yields.

For now we are taking the other side of this over speculation and think the Feds leash is very tight, thus any move in the US 10Y above 87bp will require some significant fiscal or fundamental change. We like the yields elevated into the Nov. refunding, we know the massive size of the deficit, we know that many lack the fundamental understanding of how the debt system works, but all in all Magnelibra Econemotions readers know the truth,

The system of rates and debt is a rigged system and the higher the debt will and must grow, the proclivity to pound rates lower and lower it shall be.

Rates can rise at times don’t be misled that’s not what we are denying, but if they rise rest assure the Fed will be there to thwart it and on the fiscal side we hope that rates rising is accompanied by a massive infrastructure bill and economic growth. I think many would welcome a situation like that.

Here is the link to the Zhedge CTA Article

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