The party is over - Socgen

Analysts at Societe Generale say that the party is over.

Key Quotes:

"After years of easy money, inflation is finally bottoming out. Global growth is also picking up a bit, if too late to stop populists from fast forwarding policy rotation. Fiscal policy is back in favour, reducing the need for super easy monetary policy (the Fed path will be re-priced higher, the ECB will taper, etc). As financial repression finally recedes, expect a further normalisation of bond yields over 2017. 

Prepare for a serious hangover. There is more debt in the non-financial sector than ever before. Assets under management in bond funds and portfolio duration have surged. The unwinding of this unprecedented exposure to rates will initially feed the bond sell-off and ultimately stress the credit spread complex. 

USD scarcity. As non-US borrowers struggle to roll a gigantic stock of USD-denominated debt, the crosscurrency complex will be a channel of stress. Uncontrolled USD strength is the main risk to our bearish bond views. 

Expect curve steepening in EUR, GBP and JPY as term premia normalise while forward guidance protects the front ends. 

2017 is a busy year for European politics. Idiosyncratic risks, ECB tapering and rising yields will prove challenging for sovereign spreads, though there will be selected opportunities as political risk gets overpriced, e.g. in OATs. The inflation rally has legs. We see residual value in 10y USD, the HICP belly and long-dated core breakevens."