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Treasury Yields Above 2% a Buy Signal - But Not for Stocks

Friday, 20 Jan 2012 | 5:07 PM ET

As 10-year treasury yields rose above 2 percent Friday, one “Fast Money” pro made the contrarian call to buy.

Jeff Kilburg, senior development director at Treasury Curve, said that the bond market retreated on optimism over a Greek bond deal ahead and called the possibility of quantitative easing next week from the Federal Reserve unlikely.

Treasurys Signaling All-Clear for Stocks?
Are Treasurys in a correction mode? Insight on whether you should buy Treasurys on weakness, with Jeff Kilburg, TreasuryCurve senior development director.

“I think right now the market is currently pricing in QE3,” he said, noting that QE1 gave the S&P a boost of about 600 points and QE2 added 300 points.

The S&P 500closed up 0.07 at $1,315.38.

With a gain of about 150 points since Nov. 25, Kilburg doubted the S&P could maintain it.

“I don’t see this being sustainable if some kind of European event falls short,” he said.

More realistic was a pull-back to about $1,265 with treasury yields heading back to the 1.80 percent to 1.85 percent range, Kilburg added.

“Right now we’re going to see a little bit of a pull-back in the equity market near-term,” he said.

“I would’ve thought we couldn’t hang above 1,300 this long, so I think it’s going to break,” trader Steve Grasso said.

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Trader disclosure: On Jan 19, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns WFT; Grasso owns XLU; Dicker is long SLB; Dicker is long BHI; Dicker is long HP; Kinahan is long C; Kinahan is short GS; Kinahan is long XLU; Kinahan is lng CSCO; Kinahan is short YHOO puts; Kinahan is long MSFT; Karabell is long AAPL; Karabell is long IBM; Karabell is long GOOG

For Steve Grasso
Stuart Frankel & Co and it’s partners own CSCO

Stuart Frankel & Co and it’s partners own CUBA

Stuart Frankel & Co and it’s partners own GERN

Stuart Frankel & Co and it’s partners own HPQ

Stuart Frankel & Co and it’s partners own HSPO

Stuart Frankel & Co and it’s partners own MU

Stuart Frankel & Co and it’s partners own NYX

Stuart Frankel & Co and it’s partners own PRST

Stuart Frankel & Co and it’s partners own WFT

Stuart Frankel & Co and it’s partners own XRX

For Zach Karabell
RiverTwice is short XLF

RiverTwice is short CF

For Ken Sena
The analysts and associates responsible for preparing this report receive compensation based on various factors, including the firm’s total revenues, a portion of which is generated by investment banking transactions. Evercore Group L.L.C. (“Evercore”) seeks to update our research as appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst’s judgment.

Evercore prohibits analysts, associates and members of their households from maintaining a financial interest in the securities of any company in the analyst’s area of coverage, subject to compliance with applicable regulations. Evercore prohibits analysts, associates and members of their households from serving as an officer, director, advisory board member or employee of any company that the analyst covers.

For Rebecca Patterson
No disclosures

For Jeff Kilburg
Kilburg is long TLT

For Ed Maguire
CLSA and/or Credit Agricole Securities (USA) Inc and/or the analysts involved in the preparation of this report have reason to know that an affiliate of Credit Agricole Securities (USA) Inc and/or CLSA received compensation from Microsoft Corp for non-investment banking products/services in the past 12 months.

CLSA and/or Credit Agricole Securities (USA) Inc and/or the analysts involved in the preparation of this report have reason to know that an affiliate of Credit Agricole Securities (USA) Inc and/or CLSA received compensation from International Business Machines Corp for non-investment banking products/services in the past 12 months.

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