With Treasury debt downgraded from AAA status over the week-end, the response from the market was to unleash a massive rally in the rates market
As the day progressed, risk appetite just went lower and lower, and the S&P posted a shocking -6.7% loss by the close, allowing the 10y note to walk away with a 23bp gain
We stay neutral on the direction of rates, having taken off our bullish call in anticipation of the week-end downgrade by S&P. Of course, this never actually stood in the way of the market rallying anyway, thanks to a disastrous day for stocks
Right now, the overriding concern is that investors and economists are still in the process of marking down long-term growth expectations
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