"In the short-term there are some factors that should at least contain the rise in Treasury yields, including: i) limits to how steep the US yield curve will get before carry constrains the long-end backup in yields. Example: US T.Note 10s minus 2s rarely trade above 250bps for any length of time.

ii) care of a global negative output gap, the world likely still has a disinflationary bias, although protectionism is bound to challenge this; and, here is the big wildcard,

iii) Trump's election and Brexit have underscored the rise in global political risk. Most immediately pressing is the French Presidential election that has enormous ramifications for the EUR's future, and global risk. Ironically, this could still lead to a desperate flight to US (and Japan) quality.

One broad point about Trump's election, is there is scope for an over-reaction, but there is even more potential for a failure of the collective imagination to understand the forces unleashed.

In some markets the impact of a probable change in fiscal policy (bond bearish, risk appetite positive) and a shift in political risk (T.bond bullish, but risk negative) will be in conflict. One trade where the economic and political risks align perfectly, in our view, is the short EUR/USD currency trade.

Deutsche Bank maintains a short EUR/USD position from 1.0750".

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