Halister News

(Bloomberg) -- Inflation markets are underestimating significant political risks on both sides of the Atlantic, HSBC strategist Theo Chapsalis writes in client note.

• Cheapening across EUR floors might be related to asset- swapping activity but this does not explain the cheaper caps
• The two main ways to benefit from this environment is either to buy inflation volatility or position through steepeners for a re-pricing higher of inflation risk premia with the latter more appealing due to its simplicity
• In the Euro zone, the launch of the new OATei47 has already placed sizeable downside pressure on 30y breakevens and expect an adjustment higher in the coming weeks as the market digests the additional supply
• In the U.S., find good value in the 10y sector as 30y have become expensive and there will be a TIPS auction on Oct. 20