As the world moves against bonds, readying for the seminal moment when the 10yr hits 3%, sending markets into a frenzied panic; the pencil pushers at Morgan Stanley are running in the opposite direction. They’re bullish on bonds and have taken an opposing view to their arch nemesis at Goldman.
Dire warnings could be learned about from every crevice of the market — from Goldman to Gundlach to the old fucker Buffett; everyone hates bonds — because the Federal Reserve are filled with good liars.
Record levels of shorts in the treasury market make for an interesting trade — one that could kill many dead — if we should sashay into a risk off environ — whereby all of the equityFAG money gets funneled, ever so quickly, back into bonds. Yields would drop, shorts annihilated, Goldman would lose.
Morgan thinks it could happen.
“We think the bell has tolled for the best of the bear market in longer-duration bonds,” wrote the Morgan Stanley team, led by Matthew Hornbach, global head of interest-rates strategy. “We like the long end.”
The value for Morgan Stanley is buying bonds at the long end of the Treasury curve. Hornbach’s team advised maintaining an existing bet that the gap between two-year notes and 30-year Treasuries will narrow from its current level of about 92 basis points, according to the report on Saturday.
It appears an ark is to be built. Prepare to board if the weather forecast shifts to inclement.
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I’m getting very short /ZB from right here, i.e., 144’20 (March expiry). Will cover later today at lower prices though.
Budding bearish set-ups in builders and building materials. They’ll need some help from bonds here.
Bonds may rally a little, still a bond bear market going on. There is more money to be made elsewhere at the moment. I would short more bonds if yield gets under 3.1%