US Interest Rates Strategy

Back end rates are most vulnerable to rise and the yield to curve to bear-steepen.

This is a break from the recent past, when bull flattening was the dominant theme. 

We may be early, but we suspect that a new regime of risk transfer in the rates market upon us that has titled reward-risk in favor of higher back-end rates. 

Judging by the still-low level of back-end forward rates, our core view to be short back-end duration is not in the price.

Watch out !!!

SHORT TREASURIES, SHORT STOCKS

As we can see in the graphics above ( courtesy of Barrons), bond valuations are frowzy at least. We probably have to adjust the spreads between Treasuries and Corporate / Municipal bonds. 

So, we short Long Treasuries and go long Corporate and Munis.

In the Stocks Arena, and after seeing the horrendous numbers presented by Intel ( -23% YoY ), we think that Analysts numbers for 2009 ( SP 500 Earnings +4,9% YoY) still too optimistic.

WIZ

WORLD SCENARIOS

These are the scenarios that the World is approching. Between Industrial world and EM economies, we see that the real danger can be the possible deflation and depression more than inflation and growth.

That´s maybe the answer, to our last question about Treasuries...

WIZ