J.P.Morgan Recommend Taking Profit On Tactical Short In 30s

Yesterday’s close saw J.P.Morgan recommend “taking profits on tactical shorts in 30-year Treasuries.”

• They note that “when we initiated this trade about three weeks ago, it had been predicated on bearish year-end seasonals, an outsized high grade corporate supply calendar in early-January, and long positioning.”
• “As it stands, long-end yields have risen, closely matching the average moves observed over the last 5 years, supported by approximately $60bn in high grade issuance in the week-to-date.”
• “Moreover, it’s notable that investor positioning is no longer flagging as a bearish risk: our Treasury Client Survey long index has fallen dramatically in recent weeks, and positioning now sits at its most neutral level since early-October.”
• “Given these factors, with the seasonal rise in yields now behind us, positioning more neutral, and event risk looming with the December employment, we recommend unwinding this trade.”
• “In unwinding this trade, we are being true to the rationale for adding our duration short three weeks ago, but note the bearish move could overshoot: as 30-year yields are approaching levels which could spur momentum-based selling.”