VIEW: HSBC initiate a 7-10 Year.............>

US TSYS: VIEW: HSBC initiate a 7-10 Year flattener, "as the curve slope has

steepened sig. over a short period. Current levels have acted as a ceiling since

'16, so we believe this slope has ltd room to steepen further. A risk-off curve

flattening could see the spread return to the recent low of 10bp, though it has

room to flatten further given the early '20 levels. It thus offers attractive

risk/reward along with a modest +ve carry. June FOMC dots show that the

committee does not expect a shift from the ZLB up until at least '22. In the

absence of -ve rates, Fed policy centres on communicating how long policy rates

will remain at current levels. Fwd guidance is supported by QE, which helps to

both signal the length of this period & attempt to lower long-term rates. This

points to a hockey stick flattening as the effective lower bound is extended

from short to intermediate maturities. We note that the Fed's guidance has often

been optimistic after growth has slowed. We see this trade as attractive

compared to other flattening options. Other intermediate curve slopes, such as

the 2s/10s, are below their '16 peaks." Expressed via a short 0.5% 05/31/2027

vs. long 0.625% 05/15/2030 spread at 18bp, targeting 10bp, stop at 22bp.