Katy, this is our top question. Are you still short on Treasuries? Yes, I am. Why? Because when it comes to a falling trend, it’s not just about a few days. It’s about consistent trends in the market.
I find it interesting that falling trends have been in a net short position for nine quarters. This is the first time in many decades that this has happened.
So, the reason I’m pausing right now is because we’ve been advocating for short positions all year. And for the first time, it feels like we’re already seeing the impact of those short positions. What happens next? What does the market do now? Buyers are coming in because yields are increasing.
They’re probably thinking that we may have finally reached that point. Do you think something fundamentally changed in the past few weeks to bring about this shift? Yes, I do. I believe that the data has emerged to support the story for investors. But another narrative that makes sense to me is that investors have realized that there’s a buying opportunity when yields reach 5%.
Now we are seeing this equilibrium where the disinvested curve is appearing, something we’ve been anticipating since the beginning of the year. So, Katy, to sum it up, are you no longer short on Treasuries and starting to see value, especially if yields reach 5% on the ten-year? So, overall, we still have short positions based on the frequency of our signals, but we are noticing consolidation in those signals.
There is a decrease in that particular conviction. However, I am observing more positive signals at higher frequencies. Therefore, in the short term, we may witness more potential buyers for treasuries.
But I want to remind everyone that inflation is still an issue. Rates may stay high for a longer period. So, there’s still a good chance that we’ll experience volatility instead of a new emerging trend..