Month-end "real money" portfolio rebalancing
Month-end "real money" portfolio rebalancing may take a couple of forms, with some suggesting it could be the largest benchmark shift by the likes of portfolio managers and insurance companies since October of 2015. In terms of the outperforming equity market, the 11% gain relative to bonds in November (largest differential since 2009) in the wake of the Trump election could result in some $20-27 B in equity sales to rebalance portfolios, depending on which research desk is quoted. In contrast, Barclays U.S. Treasury bond index extensions are very elevated at 0.12-years (refunding month), despite the carnage this month, which could spark some front-running of demand ahead of tomorrow's close and help keep a lid on yields below post election highs of 2.417% on the 10-year for now. For other regions bond index extensions are Europe +0.02-years, UK +0.01-years and Japan +0.05-years.