Ahead of the Easter Weekend, in lieu of its traditional rates weekly report, Citi's European Rates team headed by Harvinder Sian released a list of 15 non-consensus thoughts among which such ideas as: the 10yr BTP/Bund spread drops sub-100bp, Bunds may rally on ECB tightening, and that Neutral rates really are that low ("Why are such low rates restrictive? Because we have borrowed demand from the future and to prevent a reckoning when tomorrow arrives requires ever lower real rates").
But the one that caught our attention the most was Sian's take on the long-end of the curve, the 30Y Treasury, which in stark contrast to the vast majority of the street, he sees as not only outperforming, but is now the "cheapest asset class on the plant" for one simple reason, in fact the same reason why have said for years is why the Fed simply can not normalize: "The consensus that we are set to break multi-decade bull channels does not work because higher rates crash risk assets and then the economy."
That's really all there is to it.
The extremely controversial, if brief and to the point, take from Citi:
We took down our 30yr Treasury yield forecast for end-2018 to 2.85% because the Fed is into restrictive territory. Long end yields typically peak before the Fed. The consensus that we are set to break multi-decade bull channels does not work because higher rates crash risk assets and then the economy. With $ slope pointing to recession risks we like getting paid a coupon for an asset that should return 30%+, when the Fed initiates yield curve control on 10yr at say 1.25%.
And here's another, more dramatic, way of visualizing why the Fed is stuck, this time at the 10Y level.