According to Jinshi Data, Francesco Maria Di Bella, fixed income strategist at UniCredit, said that in the past few weeks, German short-term bonds have outperformed longer-term bonds, resulting in a steeper yield curve between 2-year and 5-year bonds and between 2-year and 10-year bonds.
The steepening trend will continue, and the spread between two-year and 10-year Treasury notes could return to positive territory in the coming months, he said in a note.
UniCredit sees the risk of an upward correction in two-year German bond yields as it believes market expectations for a European Central Bank rate cut of around 65 basis points this year are too optimistic.
