Global Yield Curves Are Snapping Steeper

Perhaps it is recency bias playing its tricks, but Treasury and Bund yields curves are steepening dramatically for the second day in a row, this time dragged higher by comments on longer-term issuance plans from Germany.

As always, German and US yield curves are moving in sync with a notable steepening again - the biggest 2-day steepening since Trump was elected.

The driver appears to be a report publushed earlier by Bloomberg that the head of Germany’s Federal Finance Agency says the government will seek to take advantage of persistently low interest rates and sell a greater volume of 30-year Bunds next year. The share of six-month and 30-year security issuance will rise in 2018 compared with the current year, while the share of 10-year Bund sales will decline.

As Citi notes, Treasuries are following its European peers and given how the flattening trend has dominated fixed income markets, one-sided positioning now looks vulnerable.

Furthermore, as we noted previously, there is potential for some violent moves in Bunds (and thus Treasuries). And the global biond market is suffering today...

Trend change...? Or rip to be sold?