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Real Yields Help Drive 10Y Sell-Off

US TSYS
  • Today’s 5bp sell-off in 10Y Tsys has been driven by a further tightening in real yields, touching new highs of -19bps last seen in March 2020.
  • Little reaction in breakevens with the 10Y of 2.84% hanging near lows from the past month whilst the 5Y5Y inflation swap only edges up slightly to sit marginally above its recent average at 2.46%.
  • FOMC members will be relieved no further drift in these longer-term inflation expectations measures, with increasingly higher yields helping to keep them from de-anchoring.

Source: Bloomberg

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