⚖️🔺 Front-End Leads USD Rate Differentials to G10: Cable FX Macro

• Since February close, we have seen yields rising across the board, the development brought rate differentials to favour the dollar over its G10 peers

• However, the gravity into U.S. rates has been isolated to the front-end of the curve, as it is shown in the graph below. Our own Cable FX Macro Dollar Spreads index measures U.S. 2-year yield rates vs the G10. The move higher in the <.RDDXYIR> has not been followed by the Bloomberg equivalent, which measures dollar 10-year yield spreads

• Tuesday session saw the 2s10s invert by more than 100 basis points, the move extended into Wednesday's session as Fed Chair Powell communicates his adjusted views to the House Financial Service Committee (again)

• Despite the fact that the most policy sensitive part of the curve is favouring the dollar, we recommend caution as the USD is not the only 'game in town' anymore, look at EUR spreads narrowing to the euro side of the equation. The Treasury-Bund 2yr differential is about 40bps narrower to where it was a year ago