Ahead of the Federal Reserve’s interest rate decision, BofA came out with a note on Wednesday morning that highlighted the fact that the financial institution believes in selling the rallies in the U.S. 10 Year Treasury ( US10Y ).
BofA stated: “We maintain a view to sell 10Y US treasury on rips such as the next wave lower (in yield) to the 3.90-3.65% retracement area.”
The financial institution went on to say “Stretched momentum remains our greatest risk/concern of a larger snapback = sell rips, not breakouts.”
Early on in premarket trading the 10Y has dipped by 1 basis point to 4.04%. Bigger picture and the instrument is up 250 basis points year-to-date.
“We prefer selling the rally in the 3.9-3.65% area…Here have been eight corrections in 10Y yield since the March 2020 low at 0.31%. They were -0.73, -0.45, -0.65, -0.37, -0.40, -0.50, -0.98, -0.46. The average net decline is -0.57. The current correction has seen a -0.44 decline from the 4.34% high. If 10y yield were to decline to the bottom of the proposed short zone it will have declined -0.69.”
For investors who share a similar vision with BofA, they may also want to analyze a group of Treasury exchange traded funds that also offer differing exposure to the Treasury market.
ETFs to watch: ( NYSEARCA: AGG ), ( NASDAQ: BND ), ( NASDAQ: TLT ), ( NASDAQ: IEI ), ( IEF ), ( SHY ), ( GOVT ), ( VGSH ), ( VGIT ), ( SCHO ), ( SCHR ), ( SPTL ), ( TLH ), and ( VGLT ).
In broader market news, stock index futures and rates are noncommittal on Wednesday as the market waits for what the Fed has to say.
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BofA says sell the rallies in 10Y U.S. treasury rips