US rates: Yields seen contained, steepeners favoured – TD Securities

TD Securities analysts highlight that the Federal Reserve’s 25bp hike and hawkish projections have boosted its inflation-fighting credibility, making nominal and real US rates attractive. They see limited upside for 10-year yields due to already-hawkish pricing and growth concerns, and argue that a re-flattening curve creates opportunities to enter steepeners over the coming months.

Attractive yields and curve steepeners

"Rates: While yields could test higher in the very short term, nominal and real rates remain attractive."

"Already-hawkish Fed pricing, increased inflation-fighting credibility, and worries about higher rates impacting growth, should help keep 10y yields contained."

"The re-flattening of the curve also offers an opportunity for investors to enter steepeners, which should remain the path of least resistance in the coming months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)