Wednesday, December 5, 2012

Catching The Next Swing In Stocks vs Bonds

Today US Treasuries rallied at the same time as stocks (note for newbies...this isn't supposed to happen).  On our stocks vs bonds model (see last weeks post) 10yr yields reached 12.5bps rich vs stocks (1bp richer than month-end).  While I expect bonds to outperform in the 2nd half of December, this next week should see a pullback from this exuberant level as we approach the 10yr and 30yr auctions next week.  For these reasons, I sold 10yr notes @ 100-11, ZN @ 133-26 and ES @ 1413 all at a ratio of 2 ES contracts vs 1mm 10yr notes and 11 ZN contracts.  These levels equate to 10yr yields 12.5bps rich vs stocks (so, i'm short all 3 securities).

More updates and conversation on this trade and the markets on join the fun.

govttrader out..

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