HALISTER1: Enter Tactical 10Y OAT/Bund Widening Trade, Target 30/32BP: BNP

Enter Tactical 10Y OAT/Bund Widening Trade, Target 30/32BP: BNP

(Bloomberg) -- Expect some 10Y OAT/bund rewidening with the risk of a return to the upper side of the PSPP range in 4Q due to the return of the risk-off mood, disappointing ECB and fast money positioning, BNP Paribas strategists including Eric Oynoyan write in client note.
  • Sell OAT Nov. 2025 vs Bund Feb. 2026; target 30/32bp, stop 18bp
  • There is no seasonal richening moving into Oct. peak in OAT redemptions and coupon payments
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Eric Oynoyan (BNP Paribas SA)

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UUID: 7947283

HALISTER1: Buy Creval and BPER, Sell BTPs Before Italian Referendum: UBS

Buy Creval and BPER, Sell BTPs Before Italian Referendum: UBS

(Bloomberg) -- The possibility of a “No” vote in Italy’s Dec. 4 referendum on constitutional reform continues to present a risk to Italian bond spreads, UBS analysts Nishay Patel and Ignacio Cerezo write in client note.
  • A “Yes” may tighten 10Y Italy/Germany spreads by 5bps-10bps initially, while a “No” vote may spur widening to more than 155bps
  • Continue to prefer long 10Y Spain vs Italy; recommend hedging against a potential escalation of Italian risks by selling 10Y Italy vs USTs, targeting 0bps
  • For Italian banks, risks are positively skewed as the upside in a “normalization” scenario supported by a “Yes” vote outweighs the limited downside in a more negative scenario potentially triggered by a “No” vote
    • Favor banks with excess capital and discounted valuation such as Creval and BPER; also has a buy rating on Intesa
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
BPE IM (Banca Popolare dell'Emilia Romagna SC)
2334520Z IM (Creval Scarl)

People
Ignacio Cerezo (UBS Securities LLC)
Nishay Patel (UBS Global Asset Management Japan Ltd)

Topics
Italy Constitution Change

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UUID: 7947283

HALISTER1: AUCTION PREVIEW: DSL 2037 Offers Value vs 2033, vs Austria

AUCTION PREVIEW: DSL 2037 Offers Value vs 2033, vs Austria

(Bloomberg) -- Netherlands to sell EU 0.75-1.25b 4% 01/2037 via tap auction, starting at 10am CET; analysts see support from repo specialness, interest to extend out of 2033 issue and own the bond vs Austria.
  • Mizuho (Peter Chatwell, Antoine Bouvet)
    • Sale will be supported by short-covering demand, judging by specialness of the bond on repo, which is common across long-dated DSLs
    • In RV, neutral on 20Y sector vs Germany, though looks expensive vs OATs; don’t expect this to impede demand, given the limited size
  • ING (Benjamin Schroeder, Martin van Vliet)
    • Long-end of DSL curve has been particularly affected by QE induced distortions, evident in repo markets as issue trades ~25bps special
    • 10s20s30s fly valuation is ~6bp off dearest levels seen surrounding the Brexit vote, despite some recent recovery auction bond still offers a pickup ~3bps (z spread) vs DSL 01/2033, which is at the upper end of a two-year range
    • Cross-market, spread vs Austria has re-widened from -30bps to around -17bps, sees scope for DSLs to outperform further
  • ABN Amro (Kim Liu)
    • Bond looks “quite rich” vs bunds, though offers opportunity to switch out of “extremely rich” 2033 issue
    • Improved outlook has prompted DSTA to lower its 2016 funding need; will issue low end of target range, will not auction long end in Q4
  • Rabobank (Richard McGuire)
    • Last 2-to-3 weeks have been a choppy period for core fixed income, with a sell-off of reasonable size now almost having been completely reversed
    • Remain constructive on duration, as a result, see DSL 2037 auction as providing an opportunity to move along the Dutch curve from the DSL 2033
    • On rich/cheap basis, see value in entering a fly, long the DSL 2037 vs DSL 2033, 2042
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Antoine Bouvet (Mizuho Financial Group Inc)
Peter Chatwell (Mizuho Financial Group Inc)
Benjamin Schroeder (ING Groep NV)
Kim Liu (ABN AMRO Group NV)
Martin Van Vliet (ING Groep NV)

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UUID: 7947283

HALISTER1: INSIDE TURKEY: Bonds, Lira Rise as Moody’s Sell-Off Eases

INSIDE TURKEY: Bonds, Lira Rise as Moody’s Sell-Off Eases

(Bloomberg) -- Turkey’s lira climbs along w/ emerging market currencies, and bonds gain, as a sell-off in Turkish assets sparked by Moody’s downgrade dissipates.
  • TRY +0.5% to 2.9669 per dollar as of 10:35am in Istanbul
  • Yld on 10-yr bonds falls 11bps to 9.69%
  • Turkey Blowout Bond Sale Shows Some Seeing Silver Lining in Junk
    • High demand at Monday’s Treasury auctions was “sign of the resilient global risk appetite, compounded by the idea that indeed, the ratings will stabilize here,” Roxana Hulea, EM strategist at Societe Generale in London, said by e-mail Monday.
    • “Turkey’s fiscal house remains in order, and, potentially, the downgrade could speed up the pace of structural reform to reclaim investment grade”
    • Recommends investors buy Turkey’s five-year lira bonds
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Roxana Hulea (Societe Generale SA)

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UUID: 7947283