US rates have moved higher despite weaker-than-expected data at the beginning of the year, as the market increasingly believes the Fed will start hiking in Q3/Q4 15.
Danske Bank notes in a report on Monday:
- Although US rates have moved higher over the past month, the market is not prepared for the Fed starting to hike rates in the middle of this year.
- Therefore, we still project a significant rise in US swap rates, mainly in the 2Y-5Y segment as we get close to lift-off in the Fed funds rate.
- We expect the long end of the US curve to be more capped due to aggressive monetary easing in Europe and Japan.
