- Close 1/2 position to pay 10y10y USD swaps (3M basis) at 3.745%
- First entry was made at 3.63%, so we book 11.5bp on this leg
- The remaining 1/2 position was opened at 3.40%, so current total P/L is 23bp
- We keep target 4.20%, and lift stop from 3.15% to 3.50% to lock in profits
Following the sell-off in core fixed income markets over the past week, it looks like the momentum is turning a bit more bullish as US Treasurys are rebounding somewhat.
Further, last week, the minutes from the December FOMC meeting showed that several members wanted to stop the bond purchases already in H2 13. This is likely to limit how much longer-term inflation expectations can rise and feed into the US forward curve in the near-term.
Overall we believe that US markets are a bit oversold at these levels. It is our view that the market will need some more positive news to break out of the ranges that have prevailed since last spring.
Hence we close half position and lift the stop on the remaining half position to lock in some profits.
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