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雷达卡
Forecast and Summary of Views
GDP Tracking
Data Review and Preview
Trade Portfolio Update
Trade Recommendations
Bond Yield Forecasts
Market_Strategy_Americas_Lets_twist_again.pdf
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Economics
Outlook 3
Weak retail sales data for May suggest that consumer spending may not be holding up as
well as previously thought. We believe labor markets, economic activity, and financial
market conditions have weakened enough to lead the FOMC to extend Operation Twist at
its June meeting. A disorderly market response to the Greek elections could prompt a
larger reaction from the Fed, including outright purchases of Treasuries and agency MBS.
Fiscal cliff notes: The only certainty is uncertainty 5
About $650bn of fiscal tightening is currently legislated for 2013. Ultimately, we expect
some agreement to extend the majority of policy measures, but the risk that no shortterm
compromise is reached will likely remain non-trivial throughout this year.
Rates strategy
Treasuries: Surprisingly resilient 10
Weak growth expectations in the US, the potential for a further rise in sovereign/bank
concerns in Europe and a negative response by risky assets if anything short of QE3 is
announced suggest rates may decline over the coming week, led by the long end.
Inflation-linked: The search for higher real yields 14
With TIPS real yields at all-time lows, we review an approach to pick up higher corporate real
yields using corporate/high yield instruments and matched-maturity CPI swaps.
Agencies: Tug of war 18
We advise continued caution in agencies heading into a period of high headline risk. To
enhance yield and limit duration risk, own front-end agency MTNs and callables.
Swaps: Twisting with uncertainty 21
The increase in sovereign spreads in core European countries could bode well for 2y
swap spread wideners. We recommend mitigating the uncertainty of an Operation
Twist extension by putting on a 2s-FV spread curve flattener.
Futures: Early bird – Richening in anticipation 24
For the past few cycles, RV traders have positioned for the next calendar roll by
richening the back US CTD only a few weeks after the previous roll. We recommend
legging into long DV01-weighted 5.5% Aug 28s basis to USU2.
Volatility: Cap-floor versus swaption wedge 26
Buy 1x11 cap-floor straddles vs swaption straddles to position for a steeper vol surface.
Money markets: Regulation and the AB-CP market 29
Legislators and regulators are focused on the AB-CP market, as well as repo and money
funds. Upcoming regulations – from Dodd Frank to Basel III – zero in on the role of
bank-sponsored liquidity and credit supports for asset-backed CP.
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