Trades: Bonds
Coming into this week, I shared in the alpha report saying there would be downside in UB this week. Link to alpha report: Here (for all the free subscribers, I took down the paywall since the edge surrounding the view has been actualized. All future alpha reports/trades will be behind the paywall though):
This view continues to be confirmed as we move back to the low end of the range:
We need to see 2s10s steepen marginally before we are able to make a short term bottom.
The short end is already steepening:
Once we have the shape of the curve shift marginally and the short-end price a more realistic scenario, my strategy will trigger a long and I will share it. As the alpha report noted, we are range-bound in bonds for the next 2 months. This means that you wait for the long end and short end to price unrealistic extremes and you take the other side of them.
We continue to see sectors like XLE and XLB rally against TLT. Outright CL prices are rallying as well. These variables along with the higher-than-expected PPI print point toward a little more downside in bonds before FOMC. However, the R:R for being short is decreasing.
Moving into FOMC, VVIX is marginally elevated likely reflecting hedges for the event:
Fundamentally, equities remain well-hedged and bullish. Stocks are likely to outperform bonds. Bonds must be actively managed but present significant alpha-generation opportunities if they are analyzed correctly.
The chaos in bonds won’t end any time soon!
Finally, check out the podcast I did on
on single-name equity ideas:
Good analysis. In the short-end at least, are we reaching too much of an extreme where market is matching the Fed dots of 3 cuts this year - so might be worth a long?