Seabreeze Partners' president Doug Kass says shorting U.S. debt may be the trade of the decade.
“Not only has the stock market gotten far too negative on U.S. economic growth,” Kass told CNBC, “so has the bond market.”
The result is that bonds are far too expensive because investors are so skittish that “good news is being ignored and bad news is being amplified,” says Kass.
Kass remains bullish on stocks but recommends shorting bonds because, “the flight to safety premium in bonds is huge today.”
“That’s something that's going to dissipate dramatically,” he says.
Investor fears notwithstanding, Kass says data such as the latest numbers from the Labor Department, which showed U.S. companies in March posted the highest number of job openings in nearly four years, suggests the recovery is getting incrementally stronger.
“It's just one more reason why I believe we're in a self-sustaining recovery," Kass says.
But Bloomberg reported that global investors’ demand for the relative safety of U.S. Treasurys will continue, pushing yields lower, amid concern Europe’s debt crisis will worsen, according to Credit Suisse Group AG’s Ira Jersey.
“The flight-to-quality bid for Treasurys just seems to continue until Europe and some of the other macro-contagion issues work themselves out,” Jersey, an interest-rate strategist in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “Internationally, the flows are into Treasurys. There is a lack of appetite to take risk.”
Treasurys rose for a third day as Greek leaders struggled to form a government after elections on the weekend raised the prospect of the country withdrawing from the region’s currency bloc, adding to haven demand.
Ten-year note yields fell to as low as 1.81 percent in New York trading and 30-year bond yields touched 3 percent, the lowest levels since February, as Greece faced the prospect of becoming the first developed nation to default on its debt.
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