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TD Initiates Long 9Y TIPS Breakeven Recommendation

US TSYS/TIPS

In a note today, TD initiates a long Jul 2029 (TII 0.25% Jul-29 vs nominal 1.625% Aug-29 Tsy) in their Global Rates Model Portfolio, saying they like the risk-reward of owning 9Y BEs. They cite the potential for strong economic data in the coming weeks; a dovish Fed; and suggest that 9Y is cheap on the TIPS BE curve.

  • "The risk to the trade is if the Fed signals tapering soon, but we believe it is too early for the Fed to strongly hint at an exit to QE".
  • Initiated at 254bps, with a target of 270bps and a stop-loss of 235bps.

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