BNP Paribas Recommends Shorting 30-Year U.S. Treasuries, Targets 5.6% Yield

BNP Paribas recommended shorting 30-year U.S. Treasuries, with an entry point of 5.36%, a target of 5.60%, and a stop-loss at 5.20%. According to Sina Finance, Guneet Dhingra, head of U.S. rates strategy at BNP Paribas, said the Federal Reserve's rate hike on Wednesday and its hawkish guidance were not enough to stabilize long-end yields. Dhingra and BNP Paribas chief U.S. economist James Egelhof wrote in a research note that the Fed's move had addressed market concerns about policy credibility, and that policy credibility should no longer be seen as a reason to be bullish on long-end yields. They said upside risks to yields remained asymmetric for three reasons: the market may view the Fed's policy as a withdrawal of easing rather than tightening, rising short-end yields could pull long-end yields higher, and markets may keep lifting expectations for the neutral rate; attention may shift to interest costs and the fiscal deficit, especially given heavy reliance on short-term Treasury bills for financing; and the factors cited by Chair Warsh, including strong economic growth, large technology company debt issuance, and geopolitical factors, were expected to persist and weigh on long-term yields.