The ceasefire opens a window to add risk again, and Citi recommends selectively chasing the rebound

Overview

This is a Citi global macro strategy report focused on whether markets should 'chase' the rebound after the US-Iran ceasefire. The report argues that although reaching a final agreement will still be a winding process, the appearance of a willingness to de-escalate on both sides is a positive signal. Because investors sharply de-risked during the conflict, while equity earnings expectations, the fundamentals of some FX carry trades, and the medium-term case for gold have not materially deteriorated, the market may see a new round of re-risking driven by position rebuilding.

Core views

The core views include: first, the ceasefire reduces left-tail risk, making investors more likely to redeploy risk; second, equity positioning is light and EPS has mostly not been hit, supporting selective addition of equity risk; third, USD safe-haven longs may fade, and EM carry is better supported after volatility signals are lifted; fourth, the rates market is diverging, with the UK and Japan more worth watching under higher oil prices and fiscal risks, and the report prefers a UK 2s30s steepener; fifth, if Hungary's opposition Tisza wins the election, risk premia may decline and benefit HGBs and HUF assets; sixth, after ETF outflows, positioning pressure in gold has eased, while lower rates, a weaker USD, and reserve diversification remain tailwinds.

Analysis framework

The report uses a cross-asset strategy framework, combining geopolitical conflict developments, investor positioning, fund flows, EPS changes, rate paths, fiscal risks, terms of trade shocks, commodity positioning, and central bank/ETF gold demand to identify assets where fundamentals changed little but positioning was hit, and expresses its views through specific trades.

Methodology notes

• Positioning analysisPositioning and Flow Analysis

  Use changes in equity, FX, commodity, and hedge fund positioning to assess the potential fuel for a rebound.

  The report repeatedly emphasizes that positioning was clearly cleaned up during the conflict; if the ceasefire continues, lightly positioned investors may gradually rebuild risk, thereby supporting a rebound in risk assets.

• Macro volatility frameworkMacro Volatility Signal for Carry

  After macro volatility alarms are lifted, the risk-reward of EM carry improves.

  The report says that the maximum volatility signal for carry previously triggered by oil price volatility has now been removed, so the environment for EM carry trades is more favorable than before.

• Fundamental screeningEPS and Rate Path Change Screen

  Look for assets whose fundamentals have not materially deteriorated after the conflict even though prices or positioning have adjusted.

  The equity section watches 1yr forward EPS, while the rates section compares whether economists' rate paths have been adjusted, in order to distinguish true fundamental changes from market overreaction.

• Fiscal risk frameworkDebt-to-GDP, Budget Forecast and ASW Sensitivity

  Use debt ratios, budget forecasts, foreign ownership of bonds, and ASW sensitivity to assess fiscal risk.

  The report believes that if high oil prices persist, fiscal risks will affect global duration, with the UK and Japan as key areas of focus.

• Commodity and safe-haven asset frameworkGold ETF Flow and Reserve Diversification Lens

  Use ETF flows, real rates, the USD, and central bank reserve diversification to judge gold's allocation value.

  The report believes that heavy ETF outflows from gold show that positioning pressure has been released, while lower rates, a weaker USD, and global fragmentation still support gold.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Global Equities

  Benefits from re-risking and position rebuilding

  Strengths

  Positioning has declined significantly, 1yr forward EPS has risen in multiple markets, and SPX has reclaimed its 200dma.

  Weaknesses

  The ceasefire process may still face setbacks, and some prior rotation has already occurred in markets such as US tech.

  Comparison

  KOSPI, emerging Asia, and some non-US markets are more attractive in terms of positioning and earnings repair; the Japan underweight has been closed.

  Risks

  Renewed conflict escalation, declining earnings expectations, and slower-than-expected investor position rebuilding.

• Energy Sector

  The report shifts to underweight

  Strengths

  Supported by EPS revisions and higher oil prices during the conflict.

  Weaknesses

  Energy longs are crowded, returns have exceeded the relative EPS improvement, and easing conflict will reduce buying pressure.

  Comparison

  Compared with other equity sectors, energy has more crowded longs and greater reversal risk.

  Risks

  If oil prices rise sharply again or Hormuz supply recovers more slowly than expected, the energy underweight may suffer.

• USD / G10 FX

  USD longs are expected to fade

  Strengths

  The USD still served as a safe haven during the conflict.

  Weaknesses

  The market has already built substantial USD longs, and fund outflows may occur after the ceasefire.

  Comparison

  The report has already sold USDSEK and believes currencies such as SEK that overshot lower after terms of trade shocks have room to recover.

  Risks

  If risk sentiment deteriorates again, safe-haven demand for the USD may return.

• EM Carry

  Regains support

  Strengths

  Macro volatility alarms have been lifted, and CEEMEA and Latam saw inflows in April.

  Weaknesses

  Still sensitive to oil prices, global volatility, and USD liquidity.

  Comparison

  Compared with G10, EM has already shown more signs of inflows in April.

  Risks

  A renewed rise in oil price volatility, escalation of geopolitical conflict, and a stronger USD.

• UK Gilts 2s30s

  New curve steepening trade added

  Strengths

  The front end was mispriced after the Iran conflict, Governor Bailey's guidance was dovish, and fiscal risks may weigh on the long end.

  Weaknesses

  The trade depends on a front-end rally and 30y underperformance happening simultaneously.

  Comparison

  The report prefers expressing the view through gilts rather than swaps, because it expects long-end ASW to weaken as fiscal uncertainty rises.

  Risks

  A more hawkish BoE, a more cautious UK Treasury, and fiscal risks coming in below expectations.

• Hungary HGBs 2031s

  New long trade added

  Strengths

  A Tisza victory could reduce risk premia, improve the fiscal trajectory, and lift HUF assets.

  Weaknesses

  Some positive election outcome expectations are already priced in, and the trade remains exposed to geopolitical risks.

  Comparison

  The back end of the curve is closer to pre-conflict levels, and the report believes it can benefit more than the front end from lower risk premia.

  Risks

  Escalation of the US-Iran conflict, a Fidesz victory, or a Tisza win by an insufficient margin.

• Gold

  The report increases gold exposure

  Strengths

  Positioning pressure has eased after heavy ETF outflows, while lower rates, a weaker USD, and reserve diversification support gold.

  Weaknesses

  CFTC data show futures positioning has not cleared as clearly as ETF data suggest, and news about some central bank gold sales may disturb sentiment.

  Comparison

  Compared with crude oil and copper, gold is more driven by rates, the USD, and global fragmentation.

  Risks

  Higher US yields, a rebound in the USD, and central bank gold buying below expectations.

• Crude Oil and Copper

  Positioning is cleaner but not the main focus for adding exposure

  Strengths

  Speculative positioning in crude oil has become cleaner after being squeezed from low levels; crowded copper longs have also declined.

  Weaknesses

  Easing conflict weakens upside momentum in oil prices, and copper prices have already reflected much of the structural tailwind.

  Comparison

  Gold has clearer macro drivers, while energy equities face reversal risk from crowded longs.

  Risks

  Uncertainty over Hormuz supply recovery, another rise in oil prices, and renewed tightening in copper fundamentals.

Key data

• Gilt 2s30s steepener entry122.6bpsTarget 160bps, observation level 100bps, risk budget $500k or 0.5% of GMS PF, FX-hedged.
• Gilt 2s30s steepener trade size$22k dv01Buy GBP 89.9mm UKT 4.375% 2028 while selling GBP 11.2mm 5.375% 2056.
• HGBs 2031s entry6.66Buy HGBs 3.25% 2031s, FX unhedged, 8k DV01, target 6.10, observation level 7.0.
• HGBs trade risk budget$500k / 0.5% of GMS portfolioKey risks include rapid escalation of the US-Iran conflict and a Fidesz election victory.
• CLP leg close price4.715Close the 2y CLP leg; CLP leg PnL is -338k / 0.34% of GMS portfolio.
• Current CLP-CAD RV PnL-286k / 0.29% of GMS portfolioPricing as of 2026-04-08 17:00 EST.
• Gold trade backdropMarch ETF outflows among the heaviest in two yearsThe report believes ETF outflows show gold positioning has been thoroughly cleared, supporting re-entry into gold trades.
• Generals signal4+ are above their 200dmaThe report says this signal is no longer triggered, and equity technicals have returned to a more moderate zone.

Impact & implications

The implication for investors is that after the ceasefire, they should not simply chase all risk assets, but should prioritize directions where positioning has been cleaned up, fundamentals have not materially worsened, and there are clear catalysts. Equities and EM carry benefit from re-risking, gold benefits from rates, the USD, and reserve diversification, while energy may instead face a pullback as the conflict premium fades and crowded longs unwind. Rates trades depend more on country-specific fiscal risks and central bank paths, and the report prefers UK curve steepening and Hungary election-related HGBs.

Risks

• The US-Iran ceasefire fails to hold or the conflict escalates rapidly.
• Ceasefire-related news flow fluctuates, and the market has lower tolerance for negative headlines than the report expects.
• Investors rebuild risk more slowly than expected, leaving the rebound without follow-through.
• Persistently high oil prices trigger stronger fiscal and inflation pressures, weighing on global duration.
• The BoE or other central banks turn more hawkish than expected.
• The UK Treasury becomes more cautious, weakening the UK fiscal risk trade thesis.
• A Fidesz victory or an insufficiently large Tisza win causes HGBs/HUF assets to react less than expected.
• The USD regains safe-haven buying, weakening EM carry, gold, and non-US currency trades.
• Central bank demand for gold or ETF flows come in below expectations.

What to watch

• Whether the US-Iran ceasefire is implemented successfully and whether it expands into broader regional conflict.
• Whether investors continue rebuilding risk in equities, the USD, commodities, and hedge fund positioning.
• Whether 1yr forward EPS continues to show resilience, especially in KOSPI, emerging Asia, the US, and Europe.
• The DXY-SPX correlation, USD fund flows, and USDSEK performance.
• Whether macro volatility indicators remain below carry warning levels.
• UK inflation, BoE guidance, UK local elections, and political developments within the Labour Party.
• Hungary election results, especially the size of a Tisza victory and progress on unlocking EU funds.
• World Gold Council March central bank gold holdings data, PBoC gold purchases, and gold ETF flows.
• The pace of oil supply recovery, Hormuz-related risks, and changes in Brent/WTI speculative positioning.