Like a rattlesnake, markets are coiling up in anticipation of the US election. Meanwhile, the global economy is defying the foot placed on it by COVID-19 and the lack of more fiscal stimulus. Once the election and associated uncertainty passes, we expect a risk-on tone to strike with a vengeance.

Interest Rate Strategy

We maintain short 30y USTs outright and short UST 30y vs. long Bunds. We maintain long 50/50 10y BTP/OAT vs. short 10y SPGB. We exit periphery tighteners including long 10y BTP vs. short 10y Bunds and long 10y Netherlands vs. short 10y Bunds. We exit short 30y UK gilts vs. long 30y Bunds. We maintain JGB30s40s flattener, long 20y JGB vs. pay 2y swap, long 10y JGB USD ASW, and JPY 20s30s swap flattener. We buy ACGBs 30y vs. UST 30y. Negative rates from the RBNZ remains overpriced.

Currency & Foreign Exchange

We suggest buying GBP/USD as Brexit news continues to develop. We look into whether the eurozone's record-high FDI inflows matter for EUR. We look at market returns when FX sentiment reaches extreme levels. We buy AUD/USD and sell 3m calls at 0.75. The NZ election may not meaningfully impact NZD, but global forces and the RBNZ likely will. We look at CADrates divergence and continue to suggest short USD/CAD.