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  • TD Securities issue new trade recommendation: Short US 10y Treasuries.
  • They cite an entry of 1.50%, targeting 1.70% with a stop-loss of 1.39%.
  • TD write that even though the last two jobs reports were weaker than consensus, momentum remains solid. They look for Q2 and Q3 GDP of 8% and 7%, respectively.
  • CPI is likely to remain strong. Even though the recent move is mostly driven by supply chain disruptions and reopening-related demand, it can bring some caution at the Fed about being too dovish.
  • While they don't expect the Fed to taper until early-2022, they expect them to sound upbeat on the recovery. The median 2023 dot is likely to move higher, and the Fed can start to talk about the conditions and timing of the exit. This should come as a surprise to the market, which is priced for a dovish Fed.
  • Even though the market is pricing in strong CPI and a dovish Fed, the biggest risk to the trade is a weakening in growth/inflation momentum and even more Fed dovishness.