Global PMIs have completed a V-shaped recovery, back in line with the pre-crisis growth trajectory. However, low UST yields & flat yield curve shape suggest investors are sceptical the reflation trade could progress to a new, consolidating stage.
The investing ideas
We argue UST inflation break-evens would have potential to rise further under a consolidating reflation scenario, led by rising nominal rather than falling real yields. UST yield curve (bear) steepeners represent a clear hedging alternative, with the 10- year sector trading rich on the curve.