📝5y5y Swap Rate Points to A Higher 10-Yr Yield Rate: Citi

The yield curve is now close to our bear case scenario, which has 2s at 4.70% and 10s at 4.25%. A simple fair value model based on the cyclical-to-defensives ratio in equities, crude oil, IG CDX spread, and the yen suggests 10-year yield should be closer to 3.4%, however just calibrating to other global bond markets, the 5y5y swap rate looks like it could move a touch higher

Curve-steepening is still the right long-term trade, especially if the last rate hike is coming into view in the next four months or so, however, our conviction level on the steepener in the short term is not very high because a strong payrolls report could create another bear flattener. - Citi Rates Strategy