Global Markets Strategy: Overview: Shift long Germany vs. UST exposure from outright to via options

The past week saw a further leg in the sell-off in DM yields which started in early July, with 10Y yields 5-17bp higher and the US underperforming cross-market. The move reflected a further repricing higher in policy tightening expectations driven by stronger-than-expected September PMI prints, especially in the Euro area and the US, as well as sensitivity to energy markets, with noise around potential US diesel export restrictions adding uncertainty around the inflation outlook. Euro area spreads notably widened, particularly France-Germany and German swap spreads, likely reflecting further deleveraging of widely subscribed trades. On strategy, our portfolio is little changed this week, although we shift our cross-market exposure into the options space. We continue to highlight that both the front-end and intermediate European yields remain cheap at current high levels, but we are wary to fade the moves given increased uncertainty on energy prices and elevated Middle East tensions, wi