If last week marked the “throwing in the towel” moment for Deutsche Bank’s Dominic Konstam with regard to the prospect of higher long-end rates, this week looks to mark a complete rethink of his team’s thesis (at least in the near-term).

Yes, Konstam’s latest note (out a day early this week to account for the holiday) still contains plenty of speculation as to how we could still get a steeper curve, there’s a decidedly conciliatory tone with regard to the prospect of bull flattening.

As for the former outcome (a steeper curve) Konstam notes that risk-off scenario could well see the market re-price expectations for the pace of FF hikes, which would concurrently squeeze the mammoth eurodollar short, but at the end of the day, the message is pretty clear. To wit:

A disruptive outcome in France could also produce two phases of curve adjustment, as Fed re-pricing (probably quickly) segues into a deeper risk off trade whereby risk assets roll over and breakevens decline, producing a sharp bullish flattener.

That’s about as clear as one could make it.

Below, find the details.

Via Deutsche Bank