BofA Survey: Investors Are Long Duration And Know It, USD Shorts Extend

The summary of the findings of the latest BofA client survey notes that “long rates is considered by far the most crowded trade.”

• “At the same time, bullish duration sentiment returns to the highs, presumably reflecting continued conviction in the fundamental underpinnings of that position.”
• “However, this is not reflected in actual duration positions, where we see evidence of profit taking in both core Europe and the UK.”
• “Investors are long, they think for good reason, but worried about the crowded nature of the trade and selectively taking profit. We share that sentiment and close our duration long in UST 5y, DBR 10y and EUR 5y5y real yields.”
• “USD bearishness extends, but is not a rate view: respondents worry the Fed is most likely to surprise on the hawkish side.”
• “Short USD/JPY moves into pole position: a favourite USD short and favourite Japan trade. We prefer short JGBs as a BoJ trade.”