Friday saw Goldman Sachs note that......>

MARKET TALK: Friday saw Goldman Sachs note that "the significant

underperformance of the front-end of the US inflation curve and relative

steepening versus the EUR HICP curve reflects the stronger growth sensitivity of

US inflation (both underlying and traded). However, a more persistent inflation

process in the Euro area means that while the up-front hit from the growth shock

is less, a bearish inflation outlook is likely to weigh somewhat more heavily on

the inflation forwards. Ultimately, this should mean that an eventual growth

recovery is reflected in a sharper rebound in CPI swaps, while the soft outlook

for Euro area inflation should act as a greater restraint on HICP swaps out the

forward curve. Although there is considerable uncertainty around the outlook for

the recovery, the relative growth and inflation dynamics combined with the more

aggressive fiscal and monetary accommodation in the US lead us to recommend

going long 5y CPI swaps versus 5y HICP swaps, where the spread is the tightest

it has been since early 2012."