Much like 2013 was a year of two halves, so 2014 looks likely to be a yearof two halves. H1 2014 will probably dominated by boredom over UStapering, and Fed forward guidance heavily influencing the front endkeeping short-end spread vol restrained. In contrast, 2 year rate spreaddivergence should become a much bigger factor in H2 2014, as future Fedtightening falls ever more solidly into a time frame that impacts 1 and 2year yields.
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Deutsche Bank