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Katy, the main question is, are you still short on Treasuries? Yes, because the falling trend has been persistent and not just for a few days. This is an interesting trend as signals have been net short for nine quarters, which is unprecedented in many decades. We have been advocating for shorting all year, and it feels like this strategy is finally paying off. Now, we are wondering what the market will do next.

Buyers are coming in because yields are increasing, and they might believe that we have reached a turning point. Do you think there has been a fundamental change in the last few weeks that led to this? Yes, I believe the data supports the narrative for investors. Additionally, investors have realized that there may be a buying opportunity when yields reach 5%. Moreover, we are starting to see an equilibrium where the disinvested curve is forming, something we have been anticipating since the beginning of the year.

So, Katy, to summarize, are you not shorting Treasuries anymore and actually seeing value, especially if yields hit the 5% level on the ten-year? While we are still shorting based on overall frequency of signals, we are seeing a consolidation in those signals, which implies less conviction. However, on a shorter-term basis, there are more positive signals indicating potential buying opportunities for Treasuries. But I want to emphasize that inflation is still a concern, and interest rates may remain high for an extended period. Therefore, there is a good chance we will continue to see volatility rather than a new emerging trend..

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