MacroScope

(Corrects to show CRT is not a primary dealer)

Bond bulls are ready to charge after Friday’s July U.S. employment data, according to a survey by Ian Lyngen, senior government bond strategist at primary dealer CRT Capital Group.

Says Lyngen:

Despite the vacation season and the multitude of ‘out of office’ responses we got, participation in this month’s survey was above-average and consistent with a market that’s engaged for the big policy/data events of the summer. As for the results of the survey, in a word: BULLISH.

Lyngen argued the survey results were the most bullish since November 2010, a point that was followed by a selloff that brought 10-year yields from 2.55 percent to 3.75 percent over the following four months.

On the eve of the July payrolls report, the benchmark 10-year Treasury stands at 1.49 percent.

In a post-non-farm payrolls rally, we found 23 percent of respondents willing to chase a rally — much higher than the 10 percent average and the highest since April 2012. Very few participants were willing to sell strength: just 19 percent versus a 40 percent average, the lowest on record.  (The survey has been conducted since 2003)

The global economic crisis has prompted  a number of economists to argue that the world will from now on experience lower trend growth, that is, roughly, that normal growth will be lower. The argument is that the current crisis is structural, not cyclical.

UBS is the latest to latch on to this view. In a client note, the bank’s economists say they have revised their 10-year average global real growth estimates to 3.4 percent from 3.8 percent. They have done the same for most of the big economies. The U.S. economy is now seen averaging 2.3 percent versus about 2.8 percent; China goes to 7.5 percent from 8.0 percent.

Does this matter? In at least one area it does — calculating the needed yield for U.S. Treasuries to be attractive over stocks. The lower the growth rate the lower the needed yield.