Zhiwei Ren of Penn Mutual questions the ability of asset managers to purchase duration. He believes there is a risk that demand fails to meet the Treasury supply.
“But asset managers’ positions are very long on Treasuries already; they don’t have room to buy more duration. If no one steps in to purchase the tremendous supply of Treasuries coming to the market soon, we will have a supply-demand imbalance.”
And almost 80% of bond strategists think Treasuries have peaked. This supports the thesis of Jim Bianco and others that rates going higher on the Treasury is the true contrarian play.