Padhraic Garvey

US Treasury yields finally get bullied further higher by mutual fund flows selling duration. A January pause from the Fed is also on minds, even as a 25bp cut is coming on Wednesday. Still, in the eurozone, we see a reasonable chance that euro rate markets will undershoot the priced-in landing point of the ECB in the near term, below our own forecast of 1.75%

Brazil is dancing to a different beat than Mexico and Colombia (and Chile, at least for now)

From Wednesday’s FOMC meeting, a key question is whether the Fed shows a tendency to pause the rate cutting from the January FOMC meeting. We think they’ll indeed pause; the question is whether they want to telegraph that. Meanwhile, Germany’s issuance plan confirms plenty of supply to absorb in 2025. And, Gilt yields are set to remain elevated

Noteworthy here is the upside shift in the market expectation for the effective fund rate for end-2025. It’s essentially flat to the current 10yr SOFR rate. Something is mis-priced here. Most likely, long tenor rates are too low. Compared to the Fed, the ECB has more flexibility to cut rates if needed, posing downside risks to the EUR front-end

We got another 25bp policy rate cut from the Fed, but updated projections and Chair Powell’s press conference confirms that the Fed is going to be much more cautious next year with sticky inflation and President Trump’s policy mix meaning a higher hurdle is required to justify rate cuts in 2025

The 30Y Gilt yield hit the highest level since 1998 as higher US rates spill over to global curves

US Treasuries remain heavy, but it's not all about the US this time. The Euro curve remains under steepening pressure. Without a catalyst to reassess the ECB path, the front-end will remain anchored, while the back-end plays out inflation concerns and supply pressures. Gilt yields also continue to rise sharply. But a quieter US on Thursday might just calm things for a bit

US Treasuries remain heavy, but it's not all about the US this time. The Euro curve remains under steepening pressure.

To abort the rise in Treasury yields, we'd need to see a print below 150k. Else onwards and upwards. In the UK, gilt yields stopped their steep ascent, but fiscal concerns remain a focal point of investors

Image Source: Pexels Don't get us wrong – we're not going all bullish on Treasuries.