Commodities | Global | Rates | US
EGB Steepening, Long China Rates
By Caroline Grady and Henry Occleston
( min read)
DM Rates Summary
- As we had expected, the ECB surprised hawkishly, with an accelerated winddown in APP.
- The ECB is setting itself up to under-deliver on hikes. Meanwhile the inflation dynamic has changed post-Russia’s invasion.
- While the knee-jerk reaction may be for the market to price in more hikes, and hence EGB curve flattening, we retain our view that EGBs will steepen ahead.
EM Rates Summary
- We remain long China rates with the ambitious GDP growth target signaling more easing ahead.
- CGBs also offer low correlation to USTs and a still-positive yield differential.
- PBoC profit transfer to the budget does not exclude further policy easing.
DM Rates Summary
- As we had expected, the ECB surprised hawkishly, with an accelerated winddown in APP.
- The ECB is setting itself up to under-deliver on hikes. Meanwhile the inflation dynamic has changed post-Russia’s invasion.
- While the knee-jerk reaction may be for the market to price in more hikes, and hence EGB curve flattening, we retain our view that EGBs will steepen ahead.
EM Rates Summary
- We remain long China rates with the ambitious GDP growth target signaling more easing ahead.
- CGBs also offer low correlation to USTs and a still-positive yield differential.
- PBoC profit transfer to the budget does not exclude further policy easing.
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