Earl Davis 1.6 3 ideas

Davis is in "selling mode" for 10-year Treasuries below 4.35% and expects yields to test new highs. The secondary inflationary impacts of the Strait of Hormuz closure—specifically affecting plastics, fertilizer, and food packaging—will sustain inflation and push long-end yields higher, regardless of the immediate military ceasefire. SHORT because the market is underpricing the sustained, secondary inflation shock that will drive yields up (and bond prices down). A rapid, permanent reopening of the Strait that quickly normalizes global supply chains and crushes inflation expectations.

Davis mentions Oracle bonds trade about 200 basis points over 30-year bonds and 100 basis points over Meta equivalent bonds. He is comfortable with the "revenue generated by the future of AI supporting the spend." The spread offers a significant cushion and reward for risk compared to tighter tech credits. LONG ORCL Credit. AI revenue fails to materialize to cover capex debts.

Davis states, "As we approach 3.90 [on the 10-year], we go more and more underweight." Koesterich says, "I would be cautious about this rally in the 10-year, particularly as we get down to 4%." The market is pricing in aggressive cuts and a flight to safety that contradicts the reality of supply issuance and persistent inflation floors. Davis argues yields below 4% are not sustainable without a crash, making this a selling opportunity. SHORT duration at these levels. A geopolitical shock or rapid recession could force yields lower (flight to quality).