Global Strategy "Rates Map - Real rate momentum broken" Caylan

Research evidence excerpt

Global Strategy "Rates Map - Real rate momentum broken" Caylan

Global Research

7 July 2026ab

Global Strategy Global Strategy

GlobalRates Map - Real rate momentum broken

Mustafa Oguz Caylan

Strategist

Real rate momentum broken following softer US jobs data; CPI next mustafa.caylan@ubs.com

+44-20-7901 5203

Our core views remain intact in US rates following Thursday's softer jobs report in the US

(+57k, UBSe +80k, consensus +110k). That leaves next week's CPI as the key data ahead Phoebe White

of the Fed's July meeting - especially given the Committee's emphasis on price stability. Strategist

The FOMC minutes, due on Wednesday, should provide more clarity. We expect phoebe.white@ubs.com

+1-212-713 2130

discussions in the minutes to sound hawkish following Chair Warsh's press conference

and nine participants seeing a rate hike as appropriate this year. We continue to fade the Reinout De Bock

rapid re-pricing of real rates by going long 5y US real yields and 2s10s steepeners. Strategist

reinout.de-bock@ubs.com

+44-20-7567 0152

Elevated excess liquidity in Europe supports steady swaps spreads

Increasing minimum reserve requirements from 1% to 2% by the ECB would have Bhanu Baweja

limited impact on swap spreads. The move would "lessen Eurosystem losses" and "mop

bhanu.baweja@ubs.com

up some excess liquidity". Tighter liquidity and leaner central bank balance sheets weigh +44-20-7568 6833

more on bond yields than swap rates (Figure 2ESTRswapspreadcurveandEurosystembalanceshetrelativetoGDP). Our economists think higher reserve

requirements could drain excess liquidity in the Eurosystem by early '28 rather than our

current baseline of mid-2028. It would still coincide with the ECB inserting more