At Any Rate Global FX and Rates: Yield curve steepening, payrolls and FX hedge ratios
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Sep 5, 2025 The discussion delves into yield curve steepening trends across developed markets, highlighting fiscal challenges specific to the UK. It analyzes the weak U.S. payroll data and rising unemployment, addressing its potential impact on the dollar and monetary policy. The hosts also explore European FX hedge ratios and market trends, with a keen focus on how upcoming Norwegian elections might shape fiscal policies. Additionally, there's a spotlight on the dynamics of Dutch pension funds and their hedging strategies against a backdrop of broader market uncertainties.
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Regionally Different Drivers Of Curve Steepening
- Global 5y–30y curve steepening is elevated but driven by different regional forces.
- US steepening reflects Fed easing repricing, Europe is technical and UK has fiscal elements.
Dutch Pension Flows Are A Technical Steepener
- European steepening is largely technical, tied to Dutch pension fund hedging shifts.
- Markets price reduced long‑dated demand before the main transitions occur in 2026–27.
Persistence Versus Limits In Curve Moves
- Technical European flows are likely to persist into early next year and support steepening.
- US front‑end repricing of terminal rates may limit further dollar curve steepening near term.