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Laxman Pai, Opalesque Asia: CTAs benefitted the most on account of the strong market movements as treasury yields reach multi-year highs, Lyxor said in its Weekly Brief.
Their short positions on U.S. Treasuries and long positions on crude oil were highly rewarding, according to the weekly report from Lyxor's Cross Asset Research.
Strong macro numbers in the U.S. have lately reignited fears of a bond market correction. Treasury yields rallied at the long end of the curve, with the 10-year reaching a record high since 2011, at 3.2%, while 2-year yields stand currently at a decade high.
The steepening of the yield curve sent shockwaves across equity markets, fueling a sector rotation in favor of financials and value stocks. Concurrently, oil prices rallied, in a context where crude supply disruptions and geopolitical risks have raised concerns over the tightness of the oil market.
"Our views on fixed income have been defensive for some time, but we are now warming up on short dated Treasuries considering the carry and the protection it provides against rising yields," said the report.
Meanwhile, CTAs' higher allocations to U.S. assets in FX and equities also helped on the back of the US Dollar appreciation and the resilience of U.S. stocks in relative terms. On a negative note, Event-Driven and L/S Equity strategies continued to underperform last week. The former was impacted negatively by the Akorn vs. Frenesius deal break in the health care sector....................... To view our full article Click here
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