M UpdateGlobal Futures Rolls Report | Global US Treasury and Gilt Futures RollsMorgan Stanley & Co. LLCAllen F LiuStrategist Allen.Liu@morganstanley.com +1 212 761-6049 Efrain A Tejeda, CFAStrategist Efrain.Tejeda@morganstanley.com +1 212 761-3529 Guneet Dhingra, CFAStrategist Guneet.Dhingra@morganstanley.com +1 212 761-1445 Francesco GrechiStrategist Francesco.Grechi@morganstanley.com +1 212 761-1009 Morgan Stanley & Co. International plc+Lorenzo TestaStrategist Lorenzo.Testa@morganstanley.com +44 20 7677-0337 We present our views on US Treasury and gilt futures contract rolls for the March to June cycle. We look at the fundamental drivers of the roll, investor positioning, delivery optionality, relative value, and repo. Finally, we suggest optimal rolling strategies. TU Contract: Bearish: We are bearish on the TU roll given positioning and the trend of recent rolls with similar positioning. FV Contract: Mildly bearish: We are mildly bearish on FV, as positioning and recent cycles are mildly bearish signals.TY Contract: Mildly bearish: We are mildly bearish on TY, as cheapness to fair value slightly offsets the bearish positioning setup.UXY Contract: Bearish: We are bearish on the UXY roll due to significant asset manager longs, recent rolls, and CTD relative value. We recommend asset managers roll early.US Contract: Neutral: We are neutral given a mildly bearish positioning setup that is offset by recent rolls and cheapness of the front contract.WN Contract: Mildly bullish: We are mildly bullish on the WN roll, as positioning and recent rolls are somewhat bullish signals.UST Repo Outlook: Neutral: Repo has remained well behaved this year, which should continue over the coming weeks given a still-large RRP. Further ahead, we expect tighter funding conditions. Gilt Contract: Mildly bullish: We see the roll trading rich. However, the short positioning in the front contract could lead to a further richening in the roll.Summary of our roll viewsContractPositioningRecent trendsOptionality/fair valueRelative valueCurveRepoOverallTUBearishMild bearishNeutralMild bullishNeutralNeutralBearishFVMild bearishMild bearishNeutralNeutralNeutralNeutralMild bearishTYBearishNeutralMild bullishNeutralNeutralNeutralMild bearishUXYBearishMild bearishMild bullishMild bearishNeutralNeutralBearishUSMild bearishMild bullishMild bullishNeutralNeutralNeutralNeutralWNMild bullishMild bullishNeutralNeutralNeutralNeutralMild bullishGiltBullishNeutralMild bearishNeutralNeutralNeutralMild bullishMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, loc...
