/ FED: Peter Chatwell of Mizuho Intl says...>

US VIEW: / FED: Peter Chatwell of Mizuho Intl says that yesterday's FOMC

statement was a "surprise" and that adding the inflation target is symmetric

"implies that the Fed will be comfortable in allowing inflation to overshoot 2%

in the medium term"

- Chatwell says that this should steepen the US yield curve with the front-end

"now looking like a solid buy" while the long-end "should bear the brunt of a

greater long term inflation risk premium".

- Chatwell expects the tightening in US money market not to reverse but sees

strong demand for short-end US Tsys and therefore "stabilize" widening in

$libor/OIS spread and allowing "some repo-funded investors to start to

re-engage".

- "Moderating Fed rate hike expectations during the course of Q2" should lead to

better buying" in the short-end of the curve and "steepener trades" becoming

"attractive to leverage investors", adds Chatwell.