ECB Decisions Favor EUR Real Yield Curve Flatteners: BAML

Considering that we are in March, euro inflation-linked bonds have been accreting the seasonally weak January HICP print over the course of the month, implying that carry is poor for linkers until April. Analysts at BAML argue that this would favor the a flattening in the EUR real yield curve in the near term. Mark Capleton and team said in their “Inflation Strategist” research note dated March 15 that they anticipate that headline inflation in Australia will head back into the RBA’s target band this year to highlight a contrast with inflation performance.

Five forces for EUR real yield curve flattening

Capleton and colleagues argue that the case for real yield curve flattening in the Eurozone was already appealing before the recent ECB developments....