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10 Dec 2014
Rate differentials make treasuries look cheap – RBS
FXStreet (Barcelona) - The RBS Research Team notes that the rate differentials are making treasuries look cheap, while anticipating domestic buyers to buy on dips.
Key Quotes
“The outright rate level of 10's is close to the bottom of the recent range (say 2.10% to 2.40%) while 10's are as rich on the curve (5's-10's-30's butterfly basis) as they've been since the summer of 2013.”
“On the other hand, rate differentials still make Treasuries look cheap to other safe haven markets and we also know/sense that domestic buyers lurk on any dip. Our auction data reveals that each of the past five 10yr auctions has come with a tail and what worries us is that WI 10yr yields are currently 15bp below the lowest auction Stop-Out rate of those five auctions.”
“Indeed, if we auction 10yrs at this morning's opening levels it will be the lowest Stop-Out rate for any 10yr auction since June of 2013-- or right at the beginning of the taper tantrum. I think we need a concession later this morning to avoid another tail.”
Key Quotes
“The outright rate level of 10's is close to the bottom of the recent range (say 2.10% to 2.40%) while 10's are as rich on the curve (5's-10's-30's butterfly basis) as they've been since the summer of 2013.”
“On the other hand, rate differentials still make Treasuries look cheap to other safe haven markets and we also know/sense that domestic buyers lurk on any dip. Our auction data reveals that each of the past five 10yr auctions has come with a tail and what worries us is that WI 10yr yields are currently 15bp below the lowest auction Stop-Out rate of those five auctions.”
“Indeed, if we auction 10yrs at this morning's opening levels it will be the lowest Stop-Out rate for any 10yr auction since June of 2013-- or right at the beginning of the taper tantrum. I think we need a concession later this morning to avoid another tail.”