Global Macro Themes - The Impact Of Real Yield Trends
US real yields have fallen slightly but have remained relatively steady in the past three months. We expect real and nominal yields to rise gradually over the course of 2014 as the recovery gains steam.
Eurozone periphery yields have fallen in nominal terms, but the drop in inflation means that real yields are still relatively high, leaving financial conditions on the tight side. We continue to see euro weakness ahead and, eventually, downside for peripheral debt.
The Mexican peso stands out as a Latin American currency that could benefit from higher real rates, and we believe that significant upside lies ahead for the MXN versus the EUR.
|Little Fluctuation In The US|
|US - 10-Year TIPS Yield (LHS) And Inflation Breakeven Rate (RHS)|