Rates Spark: Another Push Higher In Real Rates

Geopolitical tensions in the Strait of Hormuz have pushed oil prices higher, putting upward pressure on global real rates. Analysts expect current divergences in real term spreads to narrow over time.

Key Takeaways

• 1.Real rates are pushing the global curve higher, driven by geopolitical tensions in the Middle East and associated oil price spikes.
• 2.Global real term spreads have diverged, but historically tend to converge, suggesting potential downside for front-end real rates.
• 3.French government bond spreads remain volatile due to fiscal trajectory concerns and political uncertainty ahead of the 2027 elections.

Table of Contents

• Divergences in real term spreads unlikely a stable equilibrium
• Historically, real term spreads tend to converge over time
• French presidential elections: Markets want to see fiscal improvements, regardless of who brings them
• Wednesday's events and market views

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