Back end rates are most vulnerable to rise and the yield to curve to bear-steepen.This is a break from the recent past, when bull flattening was the dominant theme.
We may be early, but we suspect that a new regime of risk transfer in the rates market upon us that has titled reward-risk in favor of higher back-end rates.
Judging by the still-low level of back-end forward rates, our core view to be short back-end duration is not in the price.
Watch out !!!
