US GOVTS-RELENTLESS CURVE FLATTENING; PREMONITIONS OF TROUBLE AHEAD-IFR Markets

BOSTON, Aug 12 (IFR) – The yield curve continues on a flattening mission as large global bond fund continue to accumulate duration in a world of ever evaporating yields attached to perceived safe-haven assets. Their thinking is that the global economy remains in a world or hurt that will continue to see global central banks throw whatever lifelines they can and over an extended period of time. That global equity markets are holding up relative well is also seen as part and parcel to this thinking if owning long-duration fixed income sovereign paper is seen as the better/safer bet.

As has been repeatedly pointed out market liquidity and particular in the long-end is a shadow of its normal self with this seen as severely exaggerating the price action. Market liquidity is not expected to improve much for another few weeks or until the month of September arrives. This said, there will be a few potential opportunities along the way such as high-profile data releases (CPI and Retail Sales) this week that may initiate some selling and if so be viewed as buying opportunities.

In the meantime look to remain friendly and a dip buyer using maximum discretion in scaling out any shorts.

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