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CIBC rates strategist Richard......>

US TSYS/RESEARCH
US TSYS/RESEARCH: CIBC rates strategist Richard Gilhooly said the US Tsy 2-year
note yield will "break over 2% and head toward 2.50% early in 2018." He adds
"front-end yields have long surpassed the March (2017) highs, with 3y notes
above 2% and 2y yields approaching that level, following a near 60bp sell-off
since September that has yet to ignite overseas official buy interest."
- "But the dramatic widening in 2y rate differentials of US-Germany, seen to a
lesser degree at 10yrs, appears to have been ignored by a range-bound USD as the
long-end (we use 10y10y) forward differential has assumed more significance," he
said. "Should the ECB shift to signal a rise in the deposit rate from -40bp,
this could accelerate curve flattening in Europe and there has been some
discussion of this in recent weeks. This could see a flood of money exiting
front-end Europe and taking advantage of higher short rates in the US, but we
think the 2Y has to break over 2% and possibly to rise as far as 2.50% before
such flows become dominant."

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