US | Positioning for rate normalisation

We see the strong pull back in long-term US yields since the peak of the reflation trade this year as an opportunity to enter new positions that capitalise on future macro trends driven by mid-cycle dynamics.

The recent price action means we are now ready to tactically enter trades which will benefit from sustained global growth as we go into 2022.

We telegraphed that the recent June Fed hawkish tilt would lead to a prospectively lower inflation risk premium, but we now believe this has largely played out in fixed income markets

We think the market has downwardly re-priced the Fed funds terminal rate too aggressively, and we see an uptick in the terminal rate from here.