Happy St. Patty’s Day!!! Nothing but green on our screen and in our pockets as the we continue to bask in the afterglow of the most dovish rate hike in history. We broke 2.5 this morning and are at 2.499 as I write. I don’t know if we channeled the luck of the Irish or just knew what we were talking about, but the late Feb swoon is turning into the mid-March bounce as called for in my post on 2/15. It’s early and by no means am I calling for a new/lower range, but we’re certainly in a better spot than we were 48 hours ago.
The last 2 March bounces gave us 45-64 ticks (ex-brexit), so if we were to see a sustained bounce, that’s what I’d suggest for this year. We’re already at 32 FYI. I think anything more than 64 ticks (200bps) is a big ask and while I wouldn’t rule it out, I also wouldn’t bet on it. Should we see that though, my guess it would be on a weak q1 GDP and would likely be worth another 100 or so bps getting us in the 2.00 neighborhood on 10’s.
Coming back to present day reality, it just so happens that another 100 from right here gets us around 2.30 on the 10 year, so I think you see where I’m going with it. If you are closing in March I’d either lock here or not chase a loser next week hoping to ride the wave and risking a little of the bounce you’ve enjoyed. Beyond that I like locking on the way down to 2.30 and a full on assault at that level (if it comes and you have the time to wait it out).