RESEARCH CONTENT
This research breaks down the historical post 2014 changes in "Simple Real Yields" of 6 countries into 4 stages, contrasting the moves against inflation and economic surprise indices.
What becomes clear from the study is that there are serious relative value differences, which seem misplaced given recent inflation trends and economic data releases. This throws open some interesting cross market spread opportunities.
If cross market spreads move as expected, and current correlations with FX crosses remain in place, then there is a real possibility of a change in the Dollar valuation, something that is not priced at all by the implied vol market.
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