| Indicator | Value | Direction |
|---|---|---|
| CPI (Feb) | 2.4% YoY headline, 2.5% core | Moderating headline, sticky core |
| PCE (Jan) | 2.8% headline, 3.1% core | Revised UP — problematic |
| GDP (Q4 2025) | +0.7% annualized | Sharp deceleration from +4.4% Q3 |
| NFP (Feb) | -92,000 | Third job loss in five months |
| Unemployment | 4.44% | Rising |
| Wages | +3.8% YoY | Still firm |
| Fed Funds | 3.50-3.75% | On hold since Dec 2025 |
| Fed Stance | Hawkish hold | Dots split 7-7 on zero vs one cut |
| Indicator | Value | Direction |
|---|---|---|
| HICP (Feb) | 1.9% headline, 2.4% core | Rising from Jan lows |
| GDP (Q4 2025) | +0.3% QoQ | Tepid |
| ECB Deposit Rate | 2.00% | On hold |
| ECB Stance | Cautious hold | Markets pricing hikes; ECB not endorsing |
| Indicator | Value | Direction |
|---|---|---|
| CPI (Feb) | 3.0% headline, 3.2% core | Elevated, pre-conflict data |
| Services CPI | 4.3% | Still hot |
| GDP (Q4 2025) | +0.1% QoQ | Stagnant |
| Bank Rate | 3.75% | On hold |
| MPC Vote | 9-0 hold | Shifted from 5-4 (Feb) |
| Indicator | Value | Direction |
|---|---|---|
| CPI (Feb) | 1.3% headline, 2.5% core-core | Headline misleadingly low |
| BOJ Rate | 0.75% | Highest since 1995 |
| Stance | Gradual normalization | 62% probability of April hike |
| Central Bank | Rate | Stance | Key Issue |
|---|---|---|---|
| 🇨🇭 SNB | 0.00% | Dovish hold | Zero bound; CHF safe-haven pressure |
| 🇦🇺 RBA | 4.10% | Hawkish | Second consecutive hike; energy risk |
| 🇨🇦 BoC | 2.25% | Cautious hold | Trade war damage; inflation near target |
| Metric | Market Pricing | Official Signal | Gap |
|---|---|---|---|
| Cuts priced (2026) | ~0-1 (75-80% prob of zero) | Median dot: 1 cut | Aligned to slightly hawkish |
| Implied terminal rate | 3.50-3.75% (year-end) | Longer-run: 3.1% | Market above neutral |
| Hike probability | 3.8% by June | Not discussed | Small but non-zero |
| Metric | Market Pricing | Official Signal | Gap |
|---|---|---|---|
| Hikes priced (2026) | 2-3 hikes (~60-70bps) | No hike guidance | Large disconnect |
| Implied year-end rate | 2.50-2.75% | Staff projects 2.00% | 50-75bps gap |
| Metric | Market Pricing | Official Signal | Gap |
|---|---|---|---|
| Hikes priced (2026) | ~85bps (2-3 hikes) | 9-0 hold; no hike guidance | Largest disconnect |
| Implied year-end rate | ~4.50-4.60% | Was 5-4 for a CUT one month ago | >75bps mispricing risk |
| Metric | Market Pricing | Official Signal | Gap |
|---|---|---|---|
| April hike to 1.00% | 62% priced | BOJ signaling willingness | Aligned |
| Terminal rate | 1.25-1.50% by 2027 | Neutral range 1.0-2.5% | Reasonable |
| Market | 2Y | 10Y | 2s10s | vs UST 10y |
|---|---|---|---|---|
| 🇺🇸 US Treasury | 3.96% | 4.42% | +46bps | — |
| 🇩🇪 Bund | 2.73% | 3.00% | +27bps | -137bps |
| 🇬🇧 Gilt | 4.55% | 4.89% | +34bps | +52bps (inverted!) |
| 🇯🇵 JGB | 1.32% | 2.25% | +93bps | -210bps |
Outright rates — fading hawkish repricing
2-4 months
The BoE curve has repriced ~85bps of hikes in one month despite UK GDP at +0.1% QoQ, stalled employment, and an MPC that was 5-4 for a CUT in February. The unanimous March hold was driven by energy-shock uncertainty, not a genuine pivot to tightening. The UK cannot sustain higher rates with this growth profile.
UK GDP data (Q1 prelim, late April); MPC communications post-March; any oil price pullback on ceasefire talks
Sustained oil above $100 forcing BoE to hike defensively; UK CPI exceeding 4% triggering expectations de-anchoring; Sterling crisis forcing rate defense
Curve trade
2-6 months
2s10s at +46bps has room to steepen to +75-100bps. The front end is anchored by Fed hold (and potential dovish Warsh shift), while the long end faces persistent supply pressure ($2T+ deficit), rising term premium, and potential basis-trade unwind risk from ~$800B hedge fund short positioning.
Treasury quarterly refunding (May); Warsh confirmation hearings; continued elevated deficit prints; basis-trade stress
Risk-off flight to quality compresses long end (recession panic flattener); oil price reversal brings inflation expectations down across the curve
Cross-market relative value
3-6 months
Gilt-Bund 10y spread at ~189bps, near the widest since the 2022 mini-budget crisis. UK more vulnerable to the energy shock (net energy importer, higher pass-through, stalled growth). Germany benefits from fiscal stimulus (EUR 500B infrastructure). Target convergence to 140-150bps.
UK growth data undershooting; German fiscal stimulus details; BoE dovish lean; oil stabilization
German defense spending drives Bunds higher faster; UK inflation persistence forces BoE hikes; GBP weakness forces tightening
Forward rates — structural repricing
6-12 months
European fiscal regime shift: Germany's EUR 500B infrastructure, NATO's 3.5% GDP defense target, and energy transition capex point to structurally higher neutral rates. "Japanification" thesis is dead. EUR 5y5y at ~2.5% → target 2.75-3.25%.
ECB acknowledging higher neutral; further defense commitments; French fiscal reform
Ceasefire reverses energy prices; European growth disappoints despite fiscal; ECB pushback on hike pricing
Outright rates — policy normalization
3-6 months
BOJ is the only DM central bank in a clear tightening cycle — wage growth +5.5%, core-core CPI 2.5%, neutral range 1.0-2.5%. April hike to 1.00% is 62% priced but JGB 10y at 2.25% underprices terminal. Target 2.50-2.75%. Negative carry but directional move compensates.
April BOJ meeting (hike); continued strong wage data; yen weakness accelerating timeline
Global risk-off triggers JGB flight to quality; headline CPI at 1.3% gives BOJ cover to pause; USD/JPY reversal
| Rank | Trade | Conviction | Catalyst Clarity | Risk/Reward | Score |
|---|---|---|---|---|---|
| 1 | Receive BoE 2y SONIA | High | High — UK growth data in April | Excellent — 85bps of hikes to fade | 9/10 |
| 2 | Long US 2s10s Steepener | High | High — fiscal supply, Warsh transition | Strong — structural + multiple catalysts | 8.5/10 |
| 3 | Long Bund / Short Gilt 10y | Med-High | Medium — relative value convergence | Good — 189bps spread near crisis extremes | 7.5/10 |
| 4 | Pay EUR 5y5y Forward | Medium | Medium — structural, slow-burn | Good — regime change in European fiscal | 7/10 |
| 5 | Short JGB 10y | Medium | Medium — April BOJ meeting | Moderate — negative carry; clear direction | 6.5/10 |
| Date | Event | Relevance |
|---|---|---|
| Mar 27 | CFTC COT report | Treasury positioning update |
| Apr 3 | US NFP (March) | Confirms labor deterioration or stabilization |
| Apr 9 | US PCE (February) | Core PCE trajectory — key for Fed |
| Apr 10 | US CPI (March) | First post-conflict inflation print |
| Apr 16 | UK CPI (March) | First post-conflict UK inflation print |
| Apr 24 | BOJ meeting | Hike to 1.00% decision |
| Apr 28-29 | FOMC meeting | Hold expected; guidance is key |
| Late Apr | UK GDP (Q1 prelim) | Growth trajectory confirmation |
| May | Treasury QRA | Refunding size → long-end supply |
| May 15 | Powell term expiry | Warsh transition catalyst |
Front-End
Anchored by Fed hold. 2y at 3.96% prices slightly above the fed funds midpoint (3.625%), reflecting small hike probability. Warsh appointment could push 2y down 20-30bps.
Belly
5y at 4.08% is the pivot point — cheapest on the curve relative to forwards. Absorbing both near-term policy uncertainty and intermediate inflation risk.
Long-End
30y at 4.93% testing 5%. Term premium expanded by fiscal deficit ($39T+ debt) and basis-trade fragility (~$800B HF short). Convexity-driven spike risk.
Breakevens
5y at 2.63% (elevated) vs 10y at 2.40% — 23bp gap signals near-term inflation anxiety but anchored long-term expectations. 5y5y forward at 2.11% confirms.