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UBS Warns Again Dip Buying In Breakevens

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UBS write “RPI breakevens are at long-term lows. Is that an opportunity? Breakevens are often mean reverting, but we don't think this is one of those times.”

  • They believe that “RPI should transition to a cheaper range, driven by value and a market that has the novel luxury of being price-sensitive and value-conscious.”
  • As such they recommend shorts in the 10y-20y area, where “supply remains concentrated.”
  • Further out, they believe that “RPI is likely to underperform fixings in months ahead, supporting the transition to lower breakevens.” But caution that “house prices could push RPI higher in 2025-26, which makes us a little cautious on front-end.”
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UBS write “RPI breakevens are at long-term lows. Is that an opportunity? Breakevens are often mean reverting, but we don't think this is one of those times.”

  • They believe that “RPI should transition to a cheaper range, driven by value and a market that has the novel luxury of being price-sensitive and value-conscious.”
  • As such they recommend shorts in the 10y-20y area, where “supply remains concentrated.”
  • Further out, they believe that “RPI is likely to underperform fixings in months ahead, supporting the transition to lower breakevens.” But caution that “house prices could push RPI higher in 2025-26, which makes us a little cautious on front-end.”