Spread between US and EZ 30-year too tight! - Natixis

Dhwani Mehta FXStreet

The Research Team at Natixis, in its Strategic Daily report, highlighted that the slope of US curve too flat from 10 to 30 years.

Key Points:

In light of US fundamentals and since the Eurozone is still in the grips of QE, one would expect the US swap curve to be steeper than the EZ swap curve.

This is not so, notably at the long end. Whereas the 10-30Y slope reaches 26bp in the US, in the Eurozone it reaches 68bp.

This significant differential, in favour of the EZ curve, stems mainly from the selloff experienced by EZ debts at 30 years, which were undermined by the tapering rumours and by the rebound in EZ inflation.

Rather surprisingly, even though quite rapidly the view was that Donald Trump’s election would spur an acceleration in the US CPI, a deterioration in the US fiscal balance and a sea change in the regulatory environment for banks, this did not lead to a steepening of the US 10Y-30Y segment, on the contrary since the slope has flattened from 35bp to 26bp since 8 November.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

EUR/USD recedes to daily lows near 1.1850

EUR/USD keeps its bearish momentum well in place, slipping back to the area of 1.1850 to hit daily lows on Monday. The pair’s continuation of the leg lower comes amid decent gains in the US Dollar in a context of scarce volatility and thin trade conditions due to the inactivity in the US markets.

GBP/USD resumes the downtrend, back to the low-1.3600s

GBP/USD rapidly leaves behind Friday’s decent advance, refocusing on the downside and retreating to the 1.3630 region at the beginning of the week. In the meantime, the British Pound is expected to remain under the microscope ahead of the release of the key UK labour market report on Tuesday.

Gold looks inconclusive around $5,000

Gold partially fades Friday’s strong recovery, orbiting around the key $5,000 region per troy ounce in a context of humble gains in the Greenback on Monday. Additing to the vacillating mood, trade conditions remain thin amid the observance of the Presidents Day holiday in the US.

Bitcoin consolidates as on-chain data show mixed signals

Bitcoin price has consolidated between $65,700 and $72,000 over the past nine days, with no clear directional bias. US-listed spot ETFs recorded a $359.91 million weekly outflow, marking the fourth consecutive week of withdrawals.

The week ahead: Key inflation readings and why the AI trade could be overdone

It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.

XRP steadies in narrow range as fund inflows, futures interest rise

Ripple is trading in a narrow range between $1.45 (immediate support) and $1.50 (resistance) at the time of writing on Monday. The remittance token extended its recovery last week, peaking at $1.67 on Sunday from the weekly open at $1.43.