High correlation between U.K. and U.S. rates should moderate as the extreme volatility in U.K. rates subsides. We look for the U.K.'s policy trajectory, if maintained, will have a limited read-through to U.S. yields, while it should result in higher risk premia in U.K. gilt yields relative to other sovereign debt markets.
The 10s30s curve flattening could re-intensify on more restrictive policy or higher vol, but slope versus level of 2s favors selling 10s30s curve floors to fund 2y payers.
- Goldman Sachs Rates Strategy
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