Our friends the “anal”ysts interpretations on yesterdays Taper…

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Do with below what you will. We intend to trade AGAINST the consensus!


  • Fed taper leaves USD unattractive within G-10; USD isn’t expected to appreciate in 2014, Thomas Kressin, head of European foreign exchange at Pimco, says in interview
  • EUR, GBP and Scandinavian currencies to remain strong vs USD in next 3 to 6 months
  • Fed balance sheet will keep growing next year while ECB balance-sheet has been tightening so far


  • Fed taper won’t be big shock for bonds as still plenty of easy money in global financial system, Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, says in e-mailed note
  • Doesn’t mean rates won’t rise over time; 10Y UST yield may inch up to 3.25% by mid-2014
  • Spread sectors such as high yield, commercial mortgages, other asset-backed bonds and longer-dated municipal bonds are still better bets than USTs


  • Fed taper isn’t a game-changer
  • Look for EUR/USD, GBP/USD or AUD/NZD decline to reverse, writes Robert Lynch, currency strategist at HSBC
  • Key is extent to which Fed’s new dovish forward guidance remains credible


  • CHF is likely to weaken as Fed tapering encourages investors to unwind safe-haven positions, Beat Siegenthaler, a currency strategist at UBS, says in interview
  • Main point for market was Fed’s dovish overall message on interest rates

Morgan Stanley:

  • USD/JPY may hit 105 before year-end on Fed tapering, as risk appetite is well-supported, Morgan Stanley analysts led by Hans Redeker write in note to clients
  • Dovish statement and enhanced verbal guidance offset modest tapering


  • EUR/USD unlikely extend losses on Fed taper unless 2Y UST yield rises to 0.5%, Kit Juckes, strategist at SocGen, writes in e-mailed comments
  • Look for levels to long USD vs CAD, AUD and JPY

Credit Agricole:

  • USD to firm against yield-sensitive currencies after Fed starts tapering, Credit Agricole strategists including Mark McCormick say in client note
  • USD positions aren’t stretched; favors USD vs JPY, AUD and NZD

BNP Paribas

  • Fed decision bodes well for USD into early 2014 and should lead market participants to rebuild USD longs that were unwound after Fed failed to taper in September, BNP Paribas strategists led by Steven Saywell write in note to clients
  • Maintains short EUR/USD trade recommendation
  • Potential for further USD/JPY gains on positive reaction in equities
  • Rates: Fed decision will have major implications for euro govt bonds; no decoupling from USTs and core govt bonds
  • Credit: Spread compression regime for European spreads remain in place after Fed taper; short end of rates curve anchored by forward guidance and potential orderly advance of yields at long end, Gregory Venizelos, a strategist at BNP, writes in e-mailed comments

Standard Bank:

  • USD/JPY may extend rally after Fed tapering as stock of assets held by Fed is still rising, Steven Barrow, head of G-10 strategy at Standard Bank, writes in note to clients
  •     Fed decision doesn’t change the equation too materially for major currencies USD/JPY targets 120 in 1-2 years; EUR/USD to push to low 1.40s while GBP/USD may trade into 1.65-1.70 range


  • ‘Risk-on’ Fed taper may spur tightening periphery
  • Strong relationship between risk markets and Italian, Spanish spreads


  • Fed taper favors steeper curves and 5Y periphery as bond market largely discounted Fed’s actions amid stable UST yields
  • Investors should be buying USTs at 3%
  • Gilt underperformance can be driven by U.K. economic outperformance; short 5Y/5Y GBP vs USD


  • Near-term relief in USTs would be selling opportunity as 10Y yields should clear 3% amid curve steepening
  • Reiterate 10Y UST/bund widener as spread should stay above 100bps and edge higher

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