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#SaxoStrats: Time to close the upside inflation trade

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The massive sellout in European bonds offers an opportunity to close the upside inflation trade that Saxo Bank’s Simon Fasdal had his eyes on three weeks ago.

Head of Fixed Income Trading Simon Fasdal spotted an upside inflation trade on April 24, arguing that markets would start paying attention to the price of inflation once there were signs that the European economy was improving.

Recent forecasts for European growth combined with fund managers rebalancing their portfolios as well as market action have now triggered what Fasdal calls an “epic” selloff in German Bunds.

In his strategy for the upside inflation trade, Fasdal had a target of 152 for 10-year Bunds and is therefore looking to close that part of his upside inflation trade.