HALISTER1: UST 10Y Yield Has Scope to 1.1% in Risk Scenario, CS Says

UST 10Y Yield Has Scope to 1.1% in Risk Scenario, CS Says

(Bloomberg) -- Firm’s end-2016 forecast for UST 10Y yield of 2% “is unlikely to be achieved” amid fallout from Brexit vote, Credit Suisse strategists led by Praveen Korapaty say in note.
  • Decision on how much to lower yield forecasts will depend on forthcoming U.S. economic data, especially June employment report
  • Weaker data, “combined with negative external shocks,” could drive 10Y yield as low as 1.1%; however, this is “not our base case”
  • USTs should benefit disproportionately from safe haven flows because of their higher yields
  • UST 10/30 spread is about 10bp too steep as risk-asset selloff should create long-duration demand
  • CS also expects euro-zone peripheral spreads to widen; switching U.S.-Germany tightener to U.S.-Spain tightener
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Praveen Korapaty (Credit Suisse Group AG)

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