Meanwhile in markets, yield curve flattening and aggressive central bank rate hike bets are the name of the game. 30y government bonds have outperformed strongly this week, with 5-day yield declines ranging from 6bps for US Treasuries, 7bps for Bunds and a massive 25bps for Gilts after the UK Chancellor unveiled a deficit busting budget earlier this week. In every major bond market spreads with 30y bonds are at cyclical lows. 2y10y spreads, the widely tracked recession warning signal, have shown relatively modest declines. The 2y10y US Treasury spread has been trading around 110bps since the summer. Expect that spread to start narrowing next year when the taper is under way and rate hikes come into view

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