Trump 1st week has passed with out any major announcements on tariffs. While he did make the customary noise about Canada & Mexico, he has been soft on China since day one surprisingly. The lack of immediate tariffs on US trade partners triggered a surprising market response, with sentiment improving around international equities and currencies. While DXY has corrected significantly, US rates are still elevated. Also beyond the above policy silence on tariffs, we are also seeing encouraging signs of rental disinflation. The BLS released its repeat-rent indices this week, pointing to further slowdown in CPI measures of rent and OER. The All-Tenant Regress Rent (ATRR) index decelerated to 3.2% y-o-y in Q4 from 3.9% in Q3. Based upon policy comfort as well as inflation outlook on rentals, we believe we might have a window of fall in short end US yields. But since Trump regime is unpredictable and markets can be quite volatile, we are keeping a wide stop loss and take profit targets. Currently 5yr US SOFR is at 4.12 but we intend to receive it around 4.2 levels to give us some cushion of safety. Trade Recommendation: RECEIVE 5 YEAR US SOFR (INITIATION PRICE 4.20), TP 4.00 & SL 4.4, CMP 4.12
