“Beware The Ides Of March”: Nomura Sees “Sequencing Scenario” That Leads To Long-Awaited Stock Selloff
by Tyler Durden
ZeroHedge.com
Wed, 02/27/2019
Having previously pounded the table on a “late cycle” curve-steepener trade, this morning Nomura’s Charlie McElligott takes a deserved victory lap, noting that “the UST yield curve steepener I’ve been pushing continues to run, with 5s30s making fresh 12m highs / wides (57.7bps last) and 10s30s at 27m wides” even as the broader TSY complex has continued to rally (despite the previously noted sudden selloff across the curve, which has seen the 10Y reach the upper end of the descending triangle as a result of a barrage of corporate IG issuance coming and resultant rate-lock hedging), mostly thanks to “dovish capitulation” by central banks further metastasizes into a front-end rally “especially as funding mkts continue their recent collapse–LIBOR, SOFR and CP rates.”
Here one should perhaps note that the short-term rates market is accelerating bets on 2020 Fed “rate cut” with EDZ9EDZ0 having adding an incremental 5.5bps of easing since Feb 21st (spread was -15bps, this morning is -20.5bps). Alongside the buying frenzy on the short-end, the Nomura cross-asset strategist highlights that JPMorgan’s US Treasury Investor Sentiment Index this week making “new highs since Sep16, a +2 Standard Deviation “bullishness” relative to the past 5 years”, which may explain why on Tuesday JPMorgan initiated a tactical short in 10Y TSY Tuesday (without specifying a target or a stop). Separately, Charlie also notes that the Nomura QIS Risk Parity model $ notional allocation to USTs sits at highs last seen in May13, while the overall Global Bond $notional is at our series highs dating back to at least 2011…
The Rest…HERE
