Jefferies: The steepening yield curve trade still has potential, but cautious positioning is required.

Jin10 data reports on September 19 that Jefferies Group global economist Mohit Kumar pointed out in a report that although the steepening trade in government bond yield curves is favored by investors, its potential returns remain considerable. On Thursday, the eurozone bond yield curve steepened – indicating an expansion of the yield spread between short-term and long-term bonds – after Germany revised its debt issuance plan for the fourth quarter. Kumar stated, “As we have previously advocated, we are optimistic about the steepening trade, but global investors are also optimistic about this trade.” Kumar noted that Jefferies had recently paused the steepening trade from a tactical perspective (i.e., short-term) because this trade has formed a consensus in the institutional holdings index. “We still remain optimistic about the curve steepening in the medium term, but we will wait for positions to be further cleared and for better entry points,” he added.