Halister News

(Bloomberg) -- The moves in U.S. rates since the election result have further to run as markets likely pricing too few rate increases, too little supply and as term premium is still low on a historical basis, analysts including Richard Kelly write in client note.

• If the president-elect were to implement his campaign plans on infrastructure spending and taxes, that would imply at least four additional Fed rate increases over the next 2 years as well as the three TD Securities currently expects
• Calculates every $250b in infrastructure spending implies an additional 25bps of Fed tightening, while a percentage-point cut in average income-tax rate implies 32bps of hikes
• 10Y UST yield should stabilize around 2.5%-2.75% over the next three months, but could run further if the plan is much larger than expected
• Given unemployment near NAIRU and growing wage pressures, fiscal stimulus could have a greater impact on inflation expectations and risk premium; 10Y breakeven rate may rise to 2.25%
• The steepening of the curve is nearing a peak as any repricing of Fed moves will affect the 5Y sector most, while the belly of the curve will be most impacted amid convexity hedging and Treasury supply
  • ECB’s December meeting also a significant risk to the curve