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(Z1) Off Lows, But Remains Weak


Still Vulnerable

Wells Fargo strategists think "Fed...>

US TSYS/STOCKS: Wells Fargo strategists think "Fed balance sheet cuts and rate
hikes will cause intermediate curves to flatten while the long end may bear
steepen if U.S. fiscal standing deteriorates significantly." They add "patient
(investor) mandates looking to boost carry and rolldown should focus on the
3.5-4.5y bucket with 35-40 bps total carry/rolldown over 6 months. The 6-7y
sector looks good on a total return basis and shld continue to enjoy steady
sponsorship globally."
- They said "in the short duration sector, relative value has improved in the
2.5y bucket, especially for the old 3y series. We recommend monetizing fully
valued issues in the 1.5y sector."
* "In intermediates, relative value and carry favor old 5y issues with Jan-2021
through Apr-2022 maturities," they said. "Asset-swapping Tsys in 6-7y bucket
creates attractive positive carry positions with less duration risk and could
benefit from swap spread "dis-inversion." Long-end curves are still awaiting
resolution of several critical issues, such as potential tax reform, the next
Fed chr, and any changes to the size and composition of Tsy borrowing."