The curve should remain extremely directional with Fed pricing, we see inflation remaining high for the next few months and this should pressure Fed to continue tightening. However, the market has become concerned that the tightening in financial conditions and negative real wage growth can trigger a recession. Market pricing looks low relative to our forecast and relative to the Fed’s dot plot. We see the 10-year yield revisiting 3.5% given QT and lack of bank, foreign and asset manager demand. Recommend 5s30s flattener at 6bp with a target of -15bp.
- TD Securities Rates Strategy
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