Why Bonds Aren’t Buying This Bounce, And Why Guggenheim Expects The 10-Year Yield To Drop Below 1%

Monday, February 22, 2016
By Paul Martin

by Tyler Durden

While the algos are closely following every momentum-generating uptick in global equities on the back of yet another short squeeze in crude, one asset class that has been roundly ignored are Treasurys, which have refused to follow the equity euphoria and have in fact roundtripped today’s entire risk on move, suggesting that once again, “bonds aren’t buying it.”

And, if Bank of America analysts Shyam Rajan and Dora Xia are correct, don’t expect any “taper tantrumy” bounce in yields any times soon. According to the bank’s analysts there are three reasons against a quick turnaround.

The expected short covering bounce in risk assets and the modest back-up in rates beget questions on whether too much pessimism is already priced in and if we are setting up for a tantrum trade similar to summer 2013 and spring 2015. We do not think so. There are three reasons why this time is different and rates will find it hard to move higher sustainably, absent a coordinated policy response.

The Rest…HERE

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