Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Fixed Income Strategy
Summary: US rates are in an uptrend: the US Treasury is selling large amounts of debt; CPI data might confirm stubborn inflation, and the Bank of Japan might pave the way for fewer Japanese investments abroad. Yet, leveraged investors’ net-short two-year Treasury positions might take yields in the opposite direction if a short squeeze ensues amid a dovish surprise. We believe that the latter is unlikely and that as yields increase, a window of opportunity will open for investors wanting to lock in enticing yields in risk-free Treasuries.
Two-year yields might break resistance at 4.63% this week to find strong resistance at 4.80% next.