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2 weeks ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder |Michiel Tukker
US remain rates under upward pressure with the Moody’s downgrade probing 10y US Treasury yields beyond 4.5% again. The widening of Treasury yields versus SOFR swaps and the even more pronounced widening versus Bunds – in the 10y from 184bp to up to 193bp – underscore the domestic nature of the driver. The downgrade last week turned the spotlight back on US fiscal dynamics and the question whether there is any serious intent by politicians to rein in the deficit.
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3 weeks ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder
The break lower in the Treasury 10yr yield (back below 4.5%) makes a degree of sense in light of the PPI (lower than expected) and retail sales (weaker than expected) data. The question is what’s next? Is the dip in PPI inflation the beginning of a trend? Probably not, given the tariff effects to come. And retail sales? Less certain, but probably weaker. Industrial production was also on the weak side. Overall these April data are calming, and Treasuries indeed liked these data.
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3 weeks ago | 
think.ing.com | Benjamin Schroeder |Michiel Tukker |Padhraic Garvey
US 10yr breaks above 4.5% again Since the weekend agreement with China, we've turned bearish on Treasuries, as the recession risk has been downsized, and there's been a risk-on tone in the risk asset space. Also, we note that mutual funds had been setting short duration strategies over previous weeks, which had not shown up in prior yield movements. So an up-move in yields was overdue.
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1 month ago | 
think.ing.com | Michiel Tukker |Benjamin Schroeder |Padhraic Garvey
A move lower in US rates could overprice the number of Bank of England cuts We think the Bank of England will cut the policy rate by 25bp, and so do markets, with a full cut already priced in. Markets see the chance for a consecutive cut in June at around 50%, but here we disagree. Instead, our economists still sees the BoE sticking to a gradual easing of one cut per quarter. The sharper pricing of markets is mainly a spillover from the global unrest since Trump’s tariff’s announcements.
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1 month ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder
We saw a decent US 10yr auction. It (effectively) came through secondary levels by over a basis point. The indirect bid (external official sector driven) at 71.2% was down from last time but still decent. Direct bidders (domestic real money driven) was up to almost 20%. Overall there was less need for dealers to take up the slack, and the consequential cover at 2.6 times was decent.
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1 month ago | 
think.ing.com | Padhraic Garvey |Michiel Tukker |Benjamin Schroeder
A pause for now is good news for the eurozone and the 10Y swap rate is back at levels from before "Liberation Day". The significant rise in UST yields played an important role in this. The front end of the curve still trades at lower rates, reflecting the still-outstanding risks on investors’ minds. Markets are reverting to an ECB landing zone between 1.75-2%, a range which was held for many months previously. But we remain wary that the situation could easily worsen again.
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1 month ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder |Michiel Tukker
Whilst Dutch pension funds feel the pain from lower equity prices, the coalition party NSC is still trying to change the rules of the current reforms. In the latest proposal, each pension fund would no longer be required to obtain a vote of approval before transitioning from a defined benefits system to a defined contributions system. Instead, pension funds would have to offer the participants the possibility to opt-out from the transition of his or her assets to the new system.
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2 months ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder
The impact effect of tariffs was the discount for a recession and more rate cuts, and that combination was deemed a good rationale to buy bonds. It still is, and still could be in months to come. But the more troubling narrative of late is the notion of what we call a 'sell America Inc.' risk. It's tough to get a gauge on this, and by the way it does not have to be selling by foreigners, it can also be from domestics.
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2 months ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder |Michiel Tukker
Dollar exposure's getting pushed and pulled in a still whippy market We make the argumentation for the US 10yr to break down to 3.5% here, and why it's likely to revert then higher again. Beyond that, there are three factors to latch on to. The first is the fall in breakeven inflation. This was unexpected, as tariffs are generally accepted as placing upward pressure on prices, even if the debate as to whether it's inflationary is not settled.
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2 months ago | 
think.ing.com | Michiel Tukker |Padhraic Garvey |Benjamin Schroeder
Inflation numbers unlikely to cause a break below the 1.75-2% ECB landing zone range The eurozone inflation numbers are coming in just a day before Trump’s tariff announcements. With risk sentiment deteriorating over the past week, markets have been keen to price in a European Central Bank landing point of 1.75% again, after hugging closer to 2% for most of this month. But to break sustainably below 1.75% seems more difficult and hasn’t happened yet this year.
