re: A Who's Who of the Money Board...

quote:

---

What's your take on near to intermediate term US treasury rates? Tried shorting a few bonds last spring- no bueno, timing was off.

---

Your third sentence is kind of my answer on this question. Corporate issuers are expediting their issuance calendars before the election. From what I've heard, they are worried about uncertainty with the election outcomes/fiscal cliff, because right now we have put a lot of hope on the thought that the lame duck session will be more productive than the past 2 years combined.

So looking at a normal distribution scenario analysis you have the following probabilities:
Right tail - Lame duck has a grand bargain, interest rates rise.
Middle Right - You have bickering but not as similar to last August before they agree to a band-aid, muddle through scenario. Interest rates fall then rise, net small rise.
Middle Left - Bickering similar to last August before a last second deal. Rates fall then bottom, net fall.
Left Tail - We go over the cliff, immediate sequesters take effect. Interest rates are uncertain here, do you have a last August flight to quality scenario or are investors fed up with Washington and start dropping holdings?

Unfortunately I'm seeing a lot of evidence suggesting the left tail may be fatter than people think. Pubs all signed the pact to not raise taxes and Romney is gaining in the polls. If you have a Pub WH and a Pub Congress, they have absolutely no incentive to give anything to Dems. They can just let the cliff go over and start voting down taxes to fulfill their pact while sitting on the "look at how we fixed what the Dems did" platform.

So in summary you don't have a lot of risk for a leg down in rates unless you have a flight scenario with the cliff. A good deal of upside though. Unfortunately I can't give you a forecast because that left tail is so uncertain, which goes back to my first point about corporate issuance. I'd stay out of any US rates trades in 4Q.