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  • Writer's pictureEdward Ballsdon

The Bumpy Road Ahead

Over the last 20 years, the 2 year US Treasury has only declined 7 times by 20bps or more in a single day. Looking at previous rate hike and cut cycles, this report shows how the market should expect more outsized (15bp+) intraday yield declines at the beginning of the rate cut cycle as new surprising news is made available to market participants.


The report highlights the across the board deterioration in US economic data and 5 consecutive months of inflation data close to 10 year averages, which suggest that the FED's long term target for interest rates is in play.


With respect to financial markets, the conclusion is that outright yields and swap spreads are the important trades, whilst curve trades have no discernible trend at all.


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