Rabobank On Near-Term Curve Dynamics

Rabobank suggest that “the easing of financial conditions (as yields beat a retreat), argues that policymakers will continue to fire hawkish rhetorical shots over the market’s bow. For choice, this argues that flattening will predominate over the near term (albeit in a bumpy fashion given knife-edge nature of the current juncture) as softer data is met with a hardening central bank tone.”

• “We remain of the view that evidence of slowdowns will tip the balance such that investors will then be more confident to look through strident central bank speak and speculate that an unwillingness to pivot dovishly now (as inflation remains above target and the lessons of the 1970s inform policy makers’ thinking) will necessitate a more concerted easing campaign further down the line this leaves us seeing any near term flattening as tactical in nature and essentially a transition to a more strategic steepening”