NAB: Risk-Reward Remains More Compelling For Longer Dated BEIs

NAB note that "breakevens on the shorter dated linkers rising the fastest, with the Nov '27 BEI now almost at 1.92% and thus slightly wider than the Sep '30 BEI (differing maturity mismatches between the nominals and the linkers possibly explain the inversion, but the broad flatness of the BEI curve is notable). Shorter dated linkers will have better carry than longer dated linkers in the near term, and this does help support widening BEIs on those shorter dated lines. But the 5-/10-Year BEI curve is now at its flattest levels for quite some time and is going to depend increasingly on solid near term CPI prints to stay flat. At around 1.9% the inflation risk premium in a '25 linker looks very thin, even with expectations that short-term prints will see one-off impacts and base effects from last year's low prints. However, the risk-reward remains more compelling for longer dated BEIs and we continue to recommend holding the Sep '30."