The reflation/inflation trade seems to have reached a consensus in the markets. Despite higher inflation prints, rates have struggled to make new highs for a few weeks now and have failed to establish themselves above the 55m ema that has acted as decent resistance/support over the last few years opening the door for a new move lower in rates at least to retrace partially the recent move higher.
Watch for the 1.00% area for a target or support area in the next few months.
Watch for the 1.00% area for a target or support area in the next few months.
Comment:
As suggested in our original post, the reflation trade reached a consensus and despite continued high inflation prints, yields failed to continue to move higher and to break above the 55m ema and have turned lower since then. Watch for the area between 1.05% and 0.88% as potential target for this move and reassess the overall macro picture.