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Strong payrolls number solidifies summer rate hike scenario

Weekly investor research

09 March 2015

A strong non-farm payrolls number in the US caused another shockwave. Global fixed income curves ‘bear steepened’ as a healthier labour market confirmed the momentum of the US economic recovery. The US dollar continues to be the only game in town as the yield differential between the 10yr US treasuries and 10yr German bunds widened to its highest levels since 1989. Real money investors are switching from negative yielding European bonds to US treasuries and have been recently followed by short-term investors as low levels of FX volatility encourage the G7 carry trade. Equity investors are enjoying a combination of economic recovery with still plentiful liquidity in the system, but the threat of an early tightening by the FOMC caused equities to sell-off from their highs following the strong payrolls number.

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