New Fed Chair Kevin Warsh's hawkish tone has driven short-term rates higher, prompting a curve-flattening trade recommendation in the 30Y-5Y segment.
Key Takeaways
- 1.A hawkish FOMC under new Chair Kevin Warsh has pushed front-end rates higher despite oil price declines.
- 2.Longer-dated yields are benefiting from risk premium compression and firm Fed inflation commitments.
- 3.HSBC recommends a 30Y-5Y UST flattener trade as the curve continues to flatten.
Table of Contents
- Hawkish FOMC outweighs lower oil prices
- Front-end could remain under pressure
- Curve contrasts
- New trade idea: 30Y-5Y UST flattener
- Back to “normal”? Not so soon
- Curve contrasts
- New trade idea: 30Y-5Y UST flattener
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Authors
Dhiraj Narula
Securities
US Treasury 4.125 06/31US Treasury 5 05/56
Themes
Monetary Policy NormalizationYield Curve Flattening
Regions
North AmericaUnited States