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UBS: 2y Yields Have Lower To Go - Lessons From The Bundesbank


Wednesday saw UBS write “looking at previous cycles strengthens our conviction that German 2y bund yields will trade lower as the ECB calibrates its reaction function to safeguard a soft landing.”

  • “Similar to the US, yields on 2y German bunds are likely to fall following the ECB's final hike even if the neutral rate has shifted somewhat higher.”
  • “In the median cycle since 1973, 2y yields fell 250+bp, compared to a drop of ~60bp so far in this cycle.” They used Bundesbank rate history as a proxy for the longer run.
  • “A hawkish ECB meeting or larger-than-expected increases in December inflation are short term risks that could make for attractive entry points.”
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