FATT - Rates Spark: The Great Divergence

• We may well have seen the trough in both USD and EUR rates this summer, but we expect USD rates will rise much faster from here.
• With Fed tapering coming into view, the divergence with ECB QE policy will become more obvious.
• There is divergence on the US front end too, as bills repo is dampened by excess liquidity while the 2yr gets pushed higher by taper calls.

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