What Happened to ‘Curve Steepening’? – Fixed Income Weekly

Key Points

Fed “talking about talking about tapering” leading to a meaningful curve flattening with the front-end rate rising and the long-end rate falling, same as the medium-and long-term inflation expectation.

Credit spreads in our space remained rather resilient contrary to the sharp reflationary unwinds seen in the equity market, suggesting investor confidence in supporting technicals and consistently improving fundamentals.

Consensus from early bird mid-year outlooks show similar views as ours, we stay ‘carry centric’ for beta positioning but also focus on thematic convictions to differentiate from pure beta.

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