Halister News

(Bloomberg) -- Even though UST 10Y/bund spread has widened to historical levels, wait until it nears 250bp before fading, as Treasury rates have room to “reprice higher” and the Italian referendum may support bunds, TD strategists Priya Misra and Renuka Fernandez say in note.

• Recent rise in UST yields driven by optimism about Trump’s fiscal policies and greater Treasury supply; 10Y yield may peak around 2.75% in next few months
• Concern about Italian referendum and European politics have kept bunds bid
• Dec. 8 ECB meeting also poses a risk, as recent bond selloff has complicated the “exact timing” of a tapering decision
• If the ECB hints at tapering next week, or if the French and Dutch elections turn out to be a non-event, some of the “flight-to-quality premiums” for bunds should wane