US Treasuries: Long-end forwards return to value Page 7 Shift to bullish from mildly bullish. Anticipation of fiscal loosening and the hope for a reduction in uncertainty post-election are put forward as explanations for the 50bp move higher in the 10Y30Y US Treasury yield over the last two months. However, we expect supply fears to fade and rates to stay below the Fed’s longer-run dot, making the 2.1% level for the forward attractive. Our 10-year US Treasury forecasts of 50bp and 100bp for end-2020 and end-2021 represent the likely range through this period. 

Eurozone inflation: mildly bearish Page 15 The ECB’s own forecasts are for 1.3% inflation and whilst reported inflation will soon reach a trough, the impact of a stronger euro and persistent economic slack will continue to weigh. Increasingly entrenched Japan-style low inflation supports a mildly bearish view on Eurozone breakevens.  

UK rates could be following New Zealand Page 16 History has shown that the RBNZ likes to beat the forwards when moving rates and this is behind the dip into negative territory for short-dated kiwi rates. We note that the BoE is now studying the feasibility of negative rates and, whilst this may be one for next year, it underpins a bullish backdrop for UK gilts. 

Brazil rates: bearish on fiscal policy Page 12 We continue to see adverse conditions dominating price action for Brazilian bonds unless there are substantial improvements to the fiscal stance, which is not our base case scenario for the time being. 

Asia credit – current spread levels are excessive Page 28 Despite near-term challenges, we retain our constructive medium-term view on Asian credit markets as the current spread levels are excessive, in our opinion. In particular, the high yield property sector will benefit from low duration, high coupons, and constructive primary supply dynamics from 2021.