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21 Mar 2016
US yields: Little scope for higher yields in the short-term - Danske
According to analysts from Danske Bank, in a three-month horizon, US yields have little scope to rise.
Key Quotes:
“The dovish message was a relatively big surprise as the US data have improved, risk sentiment has rebounded and core inflation has accelerated. These three factors explain why we thought that the Fed would be relatively hawkish and why we saw a repricing of the Fed in the markets in the days up to the March meeting.”
“The dovish message from the Fed together with a step-up in QE from the ECB and the BoJ on alert to avoid a further appreciation on the yen mean that we have a very positive environment for global fixed income markets.”
“US treasuries are the only major market that offer a 10Y yield close to 2%. Hence, we expect the next three months to see a flattening of the curve 2Y10Y as investors ‘hunt’ the higher US yields and there will be little scope for higher yields.”
“Eventually the Fed will, however, resume its hiking cycle, causing US yields to trend higher, although long-term yields are pushed down by easier monetary policies by the ECB and the BoJ. This could be the case on a 6- and 12-month horizon. Our forecasts for US rates on a12M horizon are above the forward market.”
Key Quotes:
“The dovish message was a relatively big surprise as the US data have improved, risk sentiment has rebounded and core inflation has accelerated. These three factors explain why we thought that the Fed would be relatively hawkish and why we saw a repricing of the Fed in the markets in the days up to the March meeting.”
“The dovish message from the Fed together with a step-up in QE from the ECB and the BoJ on alert to avoid a further appreciation on the yen mean that we have a very positive environment for global fixed income markets.”
“US treasuries are the only major market that offer a 10Y yield close to 2%. Hence, we expect the next three months to see a flattening of the curve 2Y10Y as investors ‘hunt’ the higher US yields and there will be little scope for higher yields.”
“Eventually the Fed will, however, resume its hiking cycle, causing US yields to trend higher, although long-term yields are pushed down by easier monetary policies by the ECB and the BoJ. This could be the case on a 6- and 12-month horizon. Our forecasts for US rates on a12M horizon are above the forward market.”