Fixed Income Weekly: Bond Bonanza

Global bond markets rallied strongly despite heavy supply and robust US jobs data, leading to significant bull-flattening. The report highlights tactical opportunities in EUR, UK, and JPY rates while warning that further rallies may be constrained by term premia risks.

Key Takeaways

• 1.Bonds have performed remarkably well despite heavy supply and strong US labor data, with curves bull-flattening meaningfully.
• 2.The BoE is expected to cut rates more than markets currently price in, driven by labor market deterioration and lower inflation expectations.
• 3.Japan's JGB curve saw a sharp rally ('Takaichi trade' unwind) following a strong LDP victory which reduced fiscal and political risk premiums.

Table of Contents

• Summary of Tactical & Strategic opportunities
• EUR Rates
• Bonds rally against all odds
• A closer look at long end dynamics in EUR
• An update on Dutch pension flows
• Can the UK decouple from the rest?
• Euro SSA
• Headlines vs Horizon
• AUD rates
• JPY rates
• Global cash flow
• EUR sovereign cash flow monitor

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