CoTr UPDATE – Shorts (10yrs) Tic Up Slightly …

Couple of (interesting) observations … we’ve circled the larger short-bases and occurrences and put a large GREEN arrow above each one, to signify the associated rally in 10yr yields. By the back-of-the-napkin math, it looks as if the past 3 happenings, we’ve rallied anaverage of about 70bps. With that logic in mind, and havng seen 3.85/90 recently, using this and ONLY this as a f’casting method of rates – which we’d argue one is NOT supposed to do – it suggests a return to 3.20/3.10 is reasonable as shorts get squeezed and run for cover. As an aside, we ALSO are interested by what looks like a prior low (3.91) back in 2005, given this level was relevant as it is precisely where we closed out 2009. It might just be one of those levels that continue to be important as we trade a broader range. For NOW though, it’s just one of those things that struck US as interesting and should be on our collective radar. IN CONCLUSION, we’re noting the short base got a bit LARGER this week (-150,466 vs -143,801) and while there is (bearish bond market?) event-risk ahead – positive NFP print next Fri – we ask if there is ANY reason to BUY Tsies??? Perhaps to cover a short? Just thinkin outloud … Here’s a very marked UP visual (sorry for that):

CoTr

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