continued . . .
DECEMBER 1, 2021
EUROPEAN SESSION BRIEF:
THE 10YR YIELD CONTINUES TO RISE, EQUITIES TAGGING ALONG HIGHER, AS EXPECTED; WE LOOK TO EXIT ALL LONG NON-HEDGE TRADES, EXPECTING RESUMPTION OF 10YR YIELD DECLINE
Our long TN hedges were finally filled. We are doing this in anticipation of further Yield declines.
We are getting the effect of higher, rising yields. pre NY open, as expected late NY trade yesterday. YM and RTY indexes are rising as well. We are focusing on the stranded long YM and long RTY hedges -- which may get a chance to exit at breakeven, but probably at significantly better.
This is our expectation of the Yield rise later today, with a higher close in NY relative to the NY close yesterday (as suggested by the liquidity model).
If this scenario is correct, there is a good chance that we may be able to offload the stranded long YM and RTY long hedgers at much better than breakeven.
And we may yet get the lower levels we are looking for to exit the short GC overhedges. We want to make sure that we offload the excess short GC hedges because GC may (finally) rocket higher -- if the Yield falls further, as we expect.
With these expectations, we don't fear the short hedges. After this expected rally in yield, we in fact want to make sure that the stranded long hedges are fully hedged and even overhedged. Mr. TK and I believe that we have not seen the bottom in equities. But we have no idea yet as to a time window. Often, the Yield and equities do not bottom together.
Since we have already offloaded the short RTY hedge, we look to exiting the RTY long (2258.8, Nov 29) at more than breakeven. We will assume that the 10Yr yield is heading for at least 1.54 - 1-55 -- RTY might reach 2285 - 2295 area. YM may reach 35,390 area.
We will continue to provide updates as the NY trade goes into PM session.
NY SESSION BRIEF: -- CONTINUED . . .
A conversation with Mr. Alan LonGbon -- foremost fiscal policy analyst in the world, and PAM systemic liquidity expert. Focusing on week 2 December for a trough in yields. The Santa Claus rally will likely be late this year.
This post further provides background details into Alan's view that "What is queering the pitch a bit is the debt limit stopping treasury creation and the normal flow of things." That makes the long-bond Yield fall, all things considered -- and probably no relief on the "falling yield syndrome" until or after December 15.
Equities are over-responding to the news of Omicron COVID in California. This would have a similar water-fall effect on equities (as ion previous COVID news), as Yield also falling, but not that hard. It's time to BUY-BACK and EXIT ALL SHORT POSITIONS, INCLUDING SHORT HEDGES.
OK, GN all and I see you in early Europe. I will ask Accountant to summarize how much the short hedges and overhedges brought. I have a feeling it will be very large. But we will know tomorrow.
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