10 December 2013 by HCM
The different series of Main index in Europe are relatively homogeneous in terms of composition. Some names have gone out and others came in, but not to the extent of introducing disproportionate distortion. It is therefore possible to use the population of 10y indices to get a feel of what happened on the shape of the curve. S20 10 is a proxy for actual 10y; S19 10y is a proxy for actual 9.5y; … ; S10 10y is a proxy for the actual 5y. From this view, we see that curves are now linear between 1 and 5 year maturities (series 3 to 10) and that curves are steeper than they were 6 months ago. Given the absolute level of the spreads, the trend steeper is probably over on the short end of the curve though, and we should expect some bull flattening going forward on the 1 to 5 year section.