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Long yields

There’s quite a debate among investors regarding the equilibrium yield of the 10 year US treasury in our current context. If inflation has started a new cycle, fueled by oil, we probably have some ways to go up from current yields (4.44%). If, on the other hand, the economy is still digesting the #ratehikes and there is some slowdown or an actual recession baking in, then this could be a good entry point for investors. But when you take some perspective, as the one the chart below provides, everyone can see that we are currently seated at the long term average, and historically, yields don’t stay close to the average for long. On top of inflation, high deficits, high levels of debt, on a global basis, combined with the difficulty for banks to add duration to their bond portfolios and the intention from central banks to abandon quantitative easing programs, might put some pressure on yields to go up.


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Chart source: Deutsche Bank



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