BofAML Has A New Carry Indicator – And It’s Approaching “Exuberant”
Earlier, we talked a bit (more) about EM and the extent which the rally is or, more likely, isn't sustainable.
There are headwinds. Lots and lots of them. Some of which have been mercifully offset. For instance, a Fed that wants to normalize has been offset by a reversal of sentiment in Treasurys, where yields are no longer feeling the reflationary love and where specs are now the most long the 10Y since December 2007. That, in turn, has weighed on the dollar, providing EM with a cushion.
Mea
“The latest reading is at the 81st percentile, which has preceded a EM carry sell-off in the next four weeks 58% of the time over the 10 year backtested period.”
“However, we think such a correction will likely be bought again, and the EM bubble we called for in January is likely to continue to build in the months ahead.”
Sounds like risk-on to me because, you know, “60% of the time, I’m right every time.”
Or if you prefer the original Anchorman quote, “60% of the time, it works every time.”
lol