FPXE - Rates Spark: An Unhappy Medium

• 10Y US Treasuries and Bund currently hover respectively around 16bp and 9bp below their roughly 3-year highs. This does not suggest that the market assigns a high probability to a significant deterioration in the situation in Ukraine, but current levels reflect an unstable path between two very different scenarios.
• The value of government bonds as a macro hedge against geopolitical risk is also called into question by the rising trend in interest rates.
• Geopolitical tensions may dominate other drivers in the near term, but sooner or later, bonds will have to contend with the looming monetary policy tightening.

For further details see: