Halister News

(Bloomberg) -- U.S.-German 10Y spread tightener and EDU6/EDU7 steepener are thematic trades for 2H as global flows “are likely to remain supportive” of long end of UST curve while short end “remains priced for a much more dovish path” than at start of year, CS strategists led by Praveen Korapaty say in mid-year outlook.

• Scope for front-end steepening -- which should fall well short of Fed’s projections for fed funds rate -- is based in part on curve’s “lagged relationship” vs USD and ISM Manufacturing
• Long end support from cross-border demand evident in euro- area net buying and record pace of foreign bond purchases by Japanese investors, with scope for another $90b-$100b in purchases of USD fixed income this year
• U.S. inflation markets have “modest additional upside” based on liquidity conditions, risk appetite and commodities, though may be limited by “knock-on effects of Fed hikes”