ABS

Highlights Chart 1Rate Hikes Lagging Wage Growth Rate Hikes Lagging Wage Growth…

Highlights Chart 1Is Inflation Heating Up? Is Inflation Heating Up…

Highlights Chart 1Keep A Close Eye On Financial Conditions Keep A Close Eye On Financial Conditions…

Highlights Chart 1Strong Growth & An Easy Fed Strong Growth & An Easy Fed…

Highlights Chart 1Upside Risks & Uncertainty Upside Risks & Uncertainty…

Highlights Chart 1More Upside From Inflation bca.usbs_pas_2016_12_06_c1…

Highlights Chart 1Targeting 2% bca.usbs_pas_2016_11_08_c1…

There are two key risks that could derail a bear-flattening of the yield curve. The first is a Trump election victory, the second is a flaring of stress in the non-U.S. banking sector.

With recent comments strongly hinting that the Fed is on track for a rate hike in December, the dy-namics of the Fed Policy Loop make spread product appear extremely vulnerable.

Eventually the easing of financial conditions will strengthen the Fed's resolve to lift rates. Rate hike probabilities will rise and risk assets will struggle to cope with higher Treasury yields.