Fixed Income Chart Of The Day: Real steepening on oil

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Fixed Income Chart Of The Day: Real steepening on oil

Deutsche Bank

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Fixed Income Chart Of The Day 9 July 2026

Real steepening on oil

Markus Heider

The recent re-escalation of tensions in the Middle East has pushed oil prices back Macro Strategist

towards $80/bbl, reasserting energy as a driver of rates market volatility. Our +44-20-754-52167

current recommendation for US 2s10s real yield steepeners has benefited from

this move in energy. Gabriele Cozzi

Strategist

Today’s CoTD illustrates this relationship empirically. When energy prices rise, +44-20-754-17714

the most immediate market impact tends to come through front-end breakevens,

Francis Yared

reflecting the close link between gasoline prices and CPI. As central banks Strategist

typically look through part of the energy volatility, front-end nominal yields tend +44-20-754-54017

to be more stable, leaving real yields to largely inherit the energy beta from

breakevens (Figure). At the long end, real yield oil sensitivity is less mechanical Matthew Raskin

and dependent on the prevailing macro regime: it fluctuates and has been around +1-212-250-1741

zero on average. As a result, a rise in oil prices typically leads the inflation

breakeven curve to bull-flatten, and the real yield curve to bull-steepen (Figure). Soniya Sadeesh

We maintain our steepener recommendation, as neither the underlying rationale +44-20-754-73091

nor the key supporting arguments have materially changed. That said, we believe

Ioannis Sokos the recent oil-driven steepening does create some scope for tactical profit-taking.

+44-20-754-75680

Steven Zeng, CFA

Figure 1: The 2s10s real yield curve tends to steepen when oil prices rise, as 2y Strategist

real yields largely inherit the CPI oil beta +1-212-250-9373