EFTA01385914.pdf

Deutsche Bank Markets Research United States Economics Date Rates 27 March 2015 Credit Dnroinie kon‘tdro Research Analyst US Fixed Income Weekly Al4 oe Research Analyst • There are plenty of minefields out there but none are likely to dominate J.:cr;•h iirj'x0"a what we still think for now is a powerful rational that warrants the current term structure. Long rates are well defined by low to negative term Chief US Economist premium and a low terminal Funds rate. While we still see plenty of reasons why the Fed struggles to lift off making it as hard as it always has been to make money on shorting front rates to say a 3M forward horizon. .4ft: • There are reasonable risk reward trades that we like including using bullish Research Analyst rate views to buy cheap risk on protection e.g. on SPX. We also for choice rather receive the market than pay it based on term premium staying very negative (Europe) but also the risk of some softer US data. This would favor curve caps and some relief steepening. Volatility should be higher in the front end relative to the back end. Research Anil • The round out for 2014 GDP data was fascinating because like Rip Van Winkle after 5 years of would be accelerating recovery, we realize that there has been no acceleration - for five years! A rock solid dullness of sub 4 percent nominal growth. And everyone is so afraid of inflation! More • importantly it clearly justifies the low terminal funds rate that the market is pricing as it leaves as many questions unanswered in terms of productivity and profits especially. We look at the potential for Japanese financial sector demand for overseas 1111111111 Sitvor, irro. securities to pick up in 2015 and conclude there is up to S200 billion to Research Analyst come based on dollar yen moving to 130 and recent sensitivities of asset allocation decisions as well as pre-announced pension asset reallocations. [Actual, fhted, and projected wage acceleration Table of Content —Actual Na aCcefieretadn US Overview Page 06 —fitted AHE aCCekneber Treasuries Page 16 PfeeKted ME aCtelerateo. no uneincioreent deur* - - Projected ME accelerate°, mold unemployment decline, CIO 11.41RU Derivatives Page 22 Prelected ME accelerate°. rapid unernaterwerrt decline, FOMC NAM Agencies Page 26 Is ID. US Credit Strategy Page 28 Mortgages Page 32 PP Bond Market Strategy Page 41 Economics Page 44 Chart Peck Page 48 UM Mt) 1011 111111 1910 MI 1011 1014 196 IVO Ina 1.101 DMZ 2101 S0 .10:0 DOI MN /011 21:113 )314 /011 01 01 01 01 01 01 Cl 01 Cl CI CI 01 Cl 01 01 01 Cl 01 Cl Cl Cl CI Swot- AroWlatendDana* gent Deutsche Bank Securities Inc. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0087382 CONFIDENTIAL SDNY_GM_00233566 EFTA01385914