Rates Outlook 2022: The liquidity overflow recedes
One of the key themes for 2022 and into 2023 centres on the reversal of the various avalanches of central bank liquidity that have dominated in the past number of years. But there are lots of moving parts next year and many of them are conflicting. In net terms, we see higher market rates as winning out
Executive summary
The year ahead will feel quite different to the year just gone. The warm cloak of liquidity will feel that bit less secure as conditions begin to tighten up. Overt US rate hikes will add to that, as will talk of ECB ones to come. Market rates should be running ahead of this, pulled there by inflation. Fixed income demand and lower net supply will mute rate rises.
We target the US 10yr to hit 2% and the eurozone 10yr to get to 50bp, and keep rising. That effectively requires a repeat of the net rises in market rates seen in 2021. But expect some big, fast moves in 2022. The 10yr should make the big move in 1Q, and the 2yr at the latest by 2Q. That will set the scene for the subsequent delivery of rate hikes.
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9 December 2021
Rates Outlook 2022: The liquidity overflow recedes This bundle contains {bundle_entries}{/bundle_entries} articles
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