Dog Watching TV

Chart full term

The Ultra-Bond, an oddly named product for those uninterested in the TLT, rallied 11.5 points from mid -H to mid-J. Over the past few sessions it has retreated about 3 points. The chart above saw an un-remarkable 3.5 BP drop over that period. The blip out of the quarter does not show on the long trend picture.

The relationship between EDZ7 and EDZ8 has collapsed to 39 BP over the rally. Also, during this time the Fed has shifted its policy meme from rate hikes to balance sheet reduction. We have long questioned the concept of raising the operational cost of an unprecedented policy adjustment but will leave the debate alone for now. The "signaling" and "de-leveraging" tactics will be graded by Mr. Market over the Summer. The 39bp spread mentioned above seems far too narrow for even a modest BS drop. Something around 3x wider feels right to me.

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