This is partly what I also think. Right now, we had this "dip buying" phenomenon, which was so familiar from very bullish stock markets (then related to stock indices). At the same time, especially in Europe, the placement activity by corporate borrowers or mortgage lenders is at very high levels, implying that a correction is not too far away and that it is always good to issue new debt when and as long as the going is good.
The 30y treasury is a different thing. It was disliked by pros because there was long no material in the form of bond coming to the market rendering it quite illquid. So, trading was based on spreads to mortgages. The long standing rumor was that there will be 30y Treasury issues coming to the market in size. As a result the yield of the 30y is perhaps too high (it is much steeper than the 10y-30y European differential, or the differential on the swap markets) because it was sold off in anticipation of such events.
Recently, I prefer the more smoothely trading 10y because there is a lot of other market coverage (liquid swaps, MBS) and it is somehow more predictable.
EUR/USD is the wildcard, agreed and it very well signalises fund flows into European debt at the expense of US debt (have you noticed how the yield differential shrunk since 12/31, it narrowed by 20bps). The EUR will likely rise to significant technical chart points, and the fast movement signalises little liquidity and no sellers. Those one will return after the chart is broken...the only question for the EUR is, how high...
I have not followed the US short term futures for now. It appears that they trade off the official rates all the times. 1.70 for november is a quite optimistic bet (it appears to reflect the summary of teh opinions ranging from flat to +100bps in fed funds). The german ones trade pretty close in line with the recent EUR official rates. |
