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Multi-Asset: 1.6% QE-free Bund yields
ASR’s CIO Pack summarises the macro and the market environment. In addition it highlights 10 charts from the ASR research team for the month. For June these include:
• Our central economic scenario: “Reflation fades”
• The changing behaviour of labour markets
• Stocks Struggle vs Bonds as Reflation Trade Indicator Turns Negative
• Investors’ pro-cyclical stance not derailed by muted cycle
• Remaining strategic dollar bears vs. EUR in particular
• Could Eurozone Investors bring capital home?
• 30-year UST/Bund spread tighteners outperformed
• Eurozone Trend Underperformance needs Trend ROE to Change
• Closing gap to require Eurozone reforms or US profit fall• Sticking to long BTPs/short OATs in 10-year bonds
Multi-Asset: EM asset/FX correlations: changes and constants
We suggest US term premia can be replicated via level-neutral UST yield curve spreads. We recommend initiating steepening positions in the UST level-neutral 2/5y curve, which is trading historically extreme and offering positive carry in spite of a short duration and long volatility bias. The position can be struck via benchmark bonds or UST futures
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