When Will The Fed Begin Tapering: Here's What 10 Wall Street Strategists Think

Barclays (Anshul Pradhan, others, April 22 report)

  • Recommends trades “for a rangebound environment”
  • Front end is “still being too aggressive in pricing in inflation and hikes,” while long end has “room to push real yields higher” based on “scope for the growth outlook to be revised higher”
  • Recommends 2yr forward 10s30s swap curve steepeners, which “look too flat even assuming that the hiking cycle starts in two years”

Citi (Jason Williams, April 23 report)

  • Treasury to “take precautionary measures and reduce the size of the 20y auction,” which has experienced “a clear and consistent concession” in contrast to the 30- year
  • “There is a clear demand for long-duration bonds, but the 20y does not appear to be fulfilling that role for investors”
  • Treasury may “foreshadow a reduction in 20s for the August refunding, with a risk that it does a marginal cut this quarter”

Goldman Sachs (Praveen Korapaty, others, April 23 report)

  • “There appears to be a good case for some asymmetry on the outlook for real rates vis-à-vis inflation,” in which further inflation upside doesn’t move liftoff pricing forward very much “but a softer outlook could see the timeline shift further out”
  • More bullishness on inflation “would likely have a greater impact on the pace of hiking beyond liftoff rather than pulling forward the liftoff date by much”

JPMorgan (Jay Barry, Phoebe White, Natalie Matejkova, April 23 report)

  • Treasury yields “need a new catalyst” to move higher from current levels, and “tightening labor markets and a Fed tapering could spark such a move, but we do not see this driving Treasuries until the summer”
  • Meanwhile, “investor position technicals are short and could bias yields lower over the near term”
  • Favors lower-beta carry-efficient ways to position for higher yields and recommends holding 3s7s steepeners
  • 20-year bond introduced last year has been successful and its liquidity “should continue to improve”; any changes to issuance pattern should be modest and no earlier than August
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