Halister News

(Bloomberg) -- May Fed Fund futures (FFK6) should assign at least a 50-50 probability of Fed hiking over this horizon as opposed to current pricing of 1-in-3, Goldman Sachs strategist Francesco Garzarelli writes in client note.

• Financial conditions are back to roughly where they were when FOMC last met Dec. 16
• From a medium-term perspective, continue to be convinced that the best way to position short U.S. fixed income is to be long breakeven inflation, especially maturities between 5Y and 10Y
  • GS analysis suggests there is a well-established upward trend in core service prices, which represent 80% of the overall core CPI
• Continue to see 10Y Italy/Germany trading ~75bp
  • Should ECB QE need to be further upsized, a shift away from the current capital key allocation toward market capitalization weights seem probable which would benefit France, Italy and Spain