HALISTER1: U.S.-German 10Y Spread Has Scope to Widen Into FOMC, TD Says

U.S.-German 10Y Spread Has Scope to Widen Into FOMC, TD Says

(Bloomberg) -- Financial conditions “have been easing over the last several weeks,” and U.S. data has “been reassuring,” suggesting Fed “will try to keep all their options open,” TD strategists led by Priya Misra say in March 11 note.
  • U.S.-German 10Y spread could reach 175bp-185bp, as March seasonals “also argue for higher rates” on U.S. leg
  • Spread reached widest levels (around 190bp) in March 2015 as ECB QE began; wide spread is associated with EUR weakness/USD strength that “can hurt U.S. growth over time” and compress the spread, while “stronger global growth should argue for a tighter spread as well”
  • TD maintains its recommendations to be short front end via put spreads on EDZ6 and in 5s30 flatteners
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Priya Misra (TD Securities USA LLC)

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