As a consequence of the war to date, we are getting a feed of higher nominal yields, higher real yields and higher inflation breakevens. The 2yr breakeven inflation expectation is now at 3.2%. That’s a market average in the coming two years. At the same time, longer tenor real yields are mostly higher since the war broke, which is in fact a sign of resilience. The profile ahead is prone to feature higher longer tenor market rates, with the 10yr nominal yield getting to the 4.25% to 4.5% range (now 4.2%), on elevated inflation expectations. If, as we expect, the war is in a material wind down phase from April onwards ... (full story)