Fixed income analysts at RBS decided to exit bet on bonds, for now

RBS analysts say they believe that bonds can rally further, given the skittish tone in risk assets and the global economy but decided to square up for now as bonds hit some resistance levels they've been watching.

Their reasoning is a good example of one-the-fly risk management.

They make five points:

  1. the Daily Sentiment Index on S&Ps had reached a low 10% bulls (close to extreme), suggesting a risk bounce could be near.
  2. The daily charts for S&Ps show extended momentum, reinforcing the first point.
  3. The daily charts for Treasuries across the curve show bullish momentum is very extended, though not yet bearish.
  4. The JPMorgan bond survey is showing very few shorts at 17%
  5. Getting flat at intended targets after a strong move (25bps for the 10yrs) and re-evaluating can often give your perspective a refresh.

The final point is one that's often underestimated. It's cheap to get in and out of trades and the ability to evaluate from the sidelines is usually worth the price.