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/EGBS: TD analysts Priya Misra.....>

US TSYS/RESEARCH
US TSYS/RESEARCH: /EGBS: TD analysts Priya Misra and Pooja Kumra "believe that
longer-dated real rates in the US have risen too much recently. US 5y/5y real
rates are 30bp higher than prior to the election while the Administration has
not taken any steps to raise long term growth potential. We don't think that
modest deficit financed tax cuts should move longer dated real rates much
higher. Even a hawkish Fed Chair should not move 5y5y real rates much higher
unless asset sales are under serious consideration."
- They add that "meanwhile we think German real rates have not priced in
imminent QE tapering and have room to rise. Growth and momentum indicators don't
justify such subdued pricing."
- Therefore they suggest to "initiate $50k DV01 of long US 5y5y real rates
(TIPS) against German 5y5y real rates (GE linkers) at 156bp. Our target is at
110bp and the stop is set at 180bp."

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