Even though Fed disappointed bond bulls last week with no net increase in Treasury bond purchases, Ray Remy, head of fixed income trading at primary dealer Daiwa Capital Markets bets that the Fed will buy more Treasurys starting in January when the Twist program ends in December. Remy says buying $40bln per month on MBS will not be enough to push down the jobless rate -- 8.1% last month -- to, say, 7%. Adding in the risk of a fiscal cliff, Remy expects the 10-year yield could tumble to 1.25% in January or February and he sees the yield between 1.75% and 1.85% an attractive zone to buy. The 10-year note is bobbing between small losses and gains Friday and is recently 1/32 higher in price to yield 1.772%.
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