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Rates Spark: Some two-way risk in rates
Interestingly, recession fears boiling over have brought much needed two-way risk in rates price action. This isn’t to say that the past few months were a smooth transition towards a world in higher interest rates, but it feels like last week’s rally has really woken up investors to the rates downside scenario. Central bankers are fond of splitting nominal interest rates between a real rate and an inflation expectations component, or between a short-term interest rate expectation and a risk premium. What do these approaches indicate? In the first approach, long-term inflation swaps both in USD and EUR remain well ... (full story)