FXStreet (Delhi) - Research Team at Deutsche Bank, suggests that as the divergence between US and European monetary policy may have peaked, we believe that 2016 should see a partial convergence of US and European bond yields. Key Quotes “Our end-year forecasts see the 10-year Bund around 1.1% and 10-year US Treasury at 2.5% (although our macro forecast—with the Fed on a slow but steady uptrend – may be consistent with a somewhat higher yield by end 2016). In Europe, absent an external shock, the market is likely to focus in the second half of the year on the prospects of the ECB discussing (but not implementing) a tapering-off of asset purchases, while the front end should remain anchored. This should lead to steeper curves.” “In the US, the terminal rate priced by the market is arguably too low, and we see scope for the market to re-price this on the back of some improvement in historically low productivity and a reduction in growth headwinds that have been suppressing the neutral rate. However, the pace of hikes next year looks closer to fair given the lagged impact of the US dollar on core PCE inflation, which should limit the scope of hikes in 2016.” For more information, read our latest forex news.