NEW YORK (Reuters) – U.S. investment firm PIMCO is considering positioning itself for a steeper slope in the U.S. Treasuries yield curve as it expects more normal economic conditions, but also expects greater volatility as a result of coronavirus uncertainties and inflationary risks.
PIMCO said on Tuesday it was inclined to position itself in favor of a steepening of the Treasuries rate curve, as it expects a moderation in inflation to limit future interest rate hikes.
The manager predicts that inflation will peak in the first quarter, from when it will moderate until the end of this year.
“The peak of fiscal policy support, and therefore the peak of real GDP growth, likely occurred in 2021, and the global economy now appears to be rapidly progressing towards end-of-cycle dynamics,” said a scenario report for 2022 co-authored by Tiffany Wilding, PIMCO North America Economist.
“Monetary policy in most regions has shifted towards normalization,” he added.
At 15:42 (GMT), the difference between yields on ten-year and two-year Treasuries – seen as an indicator of economic expectations – rose 0.40 basis points to 85.88 basis points. Earlier, it had fallen to 82.50 basis points, the lowest since January 3.
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