Emerging Markets | Global | Rates | US
Gilts Net Supply, BRL Steepeners
- By Bilal Hafeez, Caroline Grady and Henry Occleston
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- 5 min read
DM Rates Summary
• Post-BoE, markets continue to over-price the prospect of rate hikes into the end of the year.
• In the near-term, further hikes are highly probable, and we expect to see the BoE begin to actively sell their Gilt holdings towards the end of H1.
• Looking at the net-supply picture, and FX-hedged yields, we see a strong case for an underperformance in the 7-10Y Gilts bucket, and consequent 2s10s re-steepening.
EM Rates Summary
• Markets are now pricing another 200bps in rate hikes from the BCB over the next few months after this week’s hawkish minutes.
• Brazil’s curve has steepened lately as BCB nears the end of the hiking cycle, but relative to history it remains very flat.
• Rate cuts will come after the October election pushing short end rates lower while ongoing fiscal risks will keep long end rates anchored. We see scope for a further steepening in the BRL 2s5s DI curve.
DM Rates Summary
• Post-BoE, markets continue to over-price the prospect of rate hikes into the end of the year.
• In the near-term, further hikes are highly probable, and we expect to see the BoE begin to actively sell their Gilt holdings towards the end of H1.
• Looking at the net-supply picture, and FX-hedged yields, we see a strong case for an underperformance in the 7-10Y Gilts bucket, and consequent 2s10s re-steepening.
EM Rates Summary
• Markets are now pricing another 200bps in rate hikes from the BCB over the next few months after this week’s hawkish minutes.
• Brazil’s curve has steepened lately as BCB nears the end of the hiking cycle, but relative to history it remains very flat.
• Rate cuts will come after the October election pushing short end rates lower while ongoing fiscal risks will keep long end rates anchored. We see scope for a further steepening in the BRL 2s5s DI curve.
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