Friday, 06 November, 2020
BofA – ecommend tactically shorting 10-year Treasuries at 0.765%, targeting a mo
BofA
recommend tactically shorting 10-year Treasuries at 0.765%, targeting a move to 0.90% and placing a stop at 0.70%, as the post-election rally appears to be an overreaction, according to BofA.
There are five key reasons for the trade:
Post-election rally is largely fueled by positioning led unwind, which is partly evidenced by the lack of reaction to the stocks rally, strategists including Ralph Axel write in a note
Still see a relatively high probability of some fiscal stimulus in early 2021. Though the chance of stimulus before Jan. 20 is low, this outcome could surprise markets
The bar for a broader risk-off event based on recounts appears to be high, with markets already prepared for this outcome and legal challenges
A definitive outcome in near-term would see yields rise as markets put the event quickly in the ‘rear view’
10-year yields remain in a rising trend channel, supported by 50-day SMA, while Wednesday’s sharp rally failed to break the 3-month trend
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