HALISTER1: April Flows to Support Flatter ASW Curves, Tighter SPGB/BTP: SG

April Flows to Support Flatter ASW Curves, Tighter SPGB/BTP: SG

(Bloomberg) -- Ultra-low rates environment and continuation of the bullish trend in EUR rates over April should fan the quest for return, thereby boosting appetite for longer duration, Societe Generale strategist Marc-Henri Thoumin writes in client note.
  • Diminishing carry and volatility-adjusted carry make the risk/reward of owning peripheral spreads less attractive; however, spreads, especially in long dates, are still far off their 2015 lows
  • Long SPGB July 2026 vs SPGB April 2021 at 60.5bp in ASW; target 50bp, stop 67bp
  • Short SPGB April 2021 vs long BTP May 2021 at 7bp in ASW; target 11bp, stop 4bp
  • Risk: negative surprise in Spain would be the formation of a left coalition that doesn’t involve Ciudadanos, though looks unlikely
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Marc-Henri Thoumin (Societe Generale SA)

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