Is All the Good News for Bonds in the Price?

- Overview: "Lower yields have not yet deterred investors from buying bonds; however, the pace of buying seems to be slowing. We look to fade the rally in Bunds."
- "We retain our medium-term short US versus Europe recommendation despite the latest wave of pessimism over the US outlook."
- US Rates Strategy: "The rising amount of Treasuries as a percentage of total US fixed income will slow because of QE Treasury purchases."
- "We expect that a return of significant convexity hedging in the US rates markets will take several years."
- Euro Rates Strategy: "Recent curve flattening dynamics have focused on 2s-10s segments, leaving 10s-30s curves looking historically steep. The Bund curve is a possible exception. We examine the outlook for different curve segments in a prolonged period of policy status quo."
- Sterling Rates Strategy: "We expect gilts and swap spreads to benefit from ongoing above consensus improvements in the UK fiscal situation."
- Global Inflation Strategy: "We continue to find BTPei rich versus OATei. We also suggest it is too early to fade the flattening of the 10s30s euro break-even inflation curve. The 20yr sector of the UK real yield curve offers good value."
- Index-linked Index Projections: "We project a large duration extension in the US ILSI at the end of August. Projected duration changes should also be supportive of UK linkers."
- APAC Rates Strategy: "The current 10-yr JGB yield reached our target of 0.9%. However, we expect the bull trend to last until the end of this month."
- "We recommend long 10yr CGS as the RBA is likely to be on hold for an extended period."
- Month-end Index Projections: "Small projected increase in the EGBI but changes should be supportive of Germany and Italy."
- Flow Analysis: "Signs that buyers of fixed income are becoming more circumspect."

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