Time to Go Long 20Y OAT vs BTP After Supply Cheapening: SocGen
(Bloomberg) -- OAT curve has already cheapened sufficiently to ensure a strong welcome for the inaugural green bond, expect outperformance of long-dated OATs after the syndication and recommend buying 2036 OAT vs BTPs, write SocGen strategists including Ciaran O’Hagan in a client note.
- Long-dated OATs have been cheapening ahead of the syndication, with 10s30s close to steepest levels this year, and spreads vs bunds widening to a larger extent than comparable credit, which shows space being made for the new green issue
- See near-term outlook for OATs as relatively stable, with
elections still too far away to be a key mover at this stage
- After already recommending long 10y OATs vs BTPs and Bunds, and long 2045 OAT and SPGB vs BTP, now recommend putting on a long OAT 05/2036 vs BTP 09/2036 at 112.5bps in z-spread, target 128bps, stop 104bps
- This view is supported by a cautious take on Italy, given the Italian constitutional court is set to give its opinion next Tuesday on how the electoral law should be implemented, which may pave the way for an early general election in 2Q
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Ciaran Ohagan (Societe Generale SA)
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