HALISTER1: Buy EUR 3m10y Straddles vs 3m5y as Curve Driven by Long End: SG

Buy EUR 3m10y Straddles vs 3m5y as Curve Driven by Long End: SG

(Bloomberg) -- Conditional trades in EUR rates attractive based on the curve remaining driven by the long end, bear-steepening or bull-flattening, Societe Generale strategist Adam Kurpiel writes in client note.
  • Buy EUR 3m10y ATMF straddles vs 3m5y, PV01-weighted
  • Strategy makes a profit at expiry if 10y rate moves sufficiently higher or lower compared to the 5y rate: that is, if the 5s10s slope steepens driven by an rise in 10y rate or flattens driven by a drop in 10y rate
  • Front-end richness, the hunt for yield and ALM receiving make EUR swap 5s10s flattening likely in a rally, even if the ECB tweaks PSPP rules in September
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Adam Kurpiel (Societe Generale SA)

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