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