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Below is a brief excerpt transcribed from Monday's edition of The Macro Show hosted by Hedgeye CEO Keith McCullough |
Let's look at the 2 Year Yield.
I've been getting a bunch of questions from subscribers saying “Are we headed for Quad 2 this quarter because Utilities went down last week?”
That's when you should've bought Utilities. But most importantly you should know one thing:
When you're trying to determine what Quad the market is pricing in you have to look at all asset classes.
The most important asset class to follow is the Currency market followed by the Rates market. Both are telling you we're in Quad 3. Not Quad 2.
Go back in time to actual Quad 2 market environments. In the second half of 2016 you can see that the 2-year Treasury yield went all the way up to 3% by October 2018. That's where we started buying 2-year Treasuries.
Now everyone is freaking out on the 10-year Treasury's recent move asking me if we're headed to Quad 2. Meanwhile, the 2-year was down -2bps last week to 0.13% and is down -4 basis points in the last 3 months.
Look at the chart!
In the fixed income market this is a very easy call to make. Don’t confuse short term moves on the long end of the curve with a new Quad because that’s not what we have.
