AUCTION PREVIEW: 10Y Gilt Rich Outright; Value in RV, on Curve
Source: BFW (Bloomberg First Word)
People
Bert Lourenco (HSBC Securities Inc)
Giuseppe Maraffino (Barclays PLC)
Nishay Patel (UBS Global Asset Management Japan Ltd)
Parisha Saimbi (BNP Paribas SA)
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UUID: 7947283
(Bloomberg) -- U.K. to sell 1.5% 07/2026 for GBP2.75b at 11:30am CET. Analysts note outright yields not particularly attractive, though see value on curve, ASW, and as part of 5s10s flatteners.
Alert: HALISTER1- BNP (Parisha Saimbi)
- New 10Y Gilt issues typically come at discount vs peer, then richen on the second, third re-opening
- Outright yield is low, attractive to own the bond as part of 5s10s flatteners
- Cross-market model using money market spreads, currency, inflation, growth as inputs suggest 10Y U.K. rates ~20bps cheap vs EUR rates
- HSBC (Bert Lourenco)
- Pricing ~13.5bps in grey market on the roll, fair value should be 12bps; last 10Y gilt auction of FY15/16
- Expect gilt outperformance to continue, target 1% 10Y yields by end of 3Q
- Retracement of gilts recently provides good entry point for longs, recommend buying outright or vs 3.75% 07/2052 in case a bigger Brexit risk premium puts pressure long- end gilts
- Barclays (Giuseppe Maraffino)
- New issues tend to trade cheap vs surrounding issues on the curve, likely to persist as new bonds tend to be tapped frequently
- New 2026 issue is likely to be the mainstay of 10Y supply through 2016; should be some demand in RV, as well as in ASW given the recent underperformance of gilts vs OIS swaps
- UBS (Nishay Patel)
- 5s10s close to steeper end of 6-month range, 10Y at cheapest ASW levels in 6-months; gilts have underperformed over past few sessions
Source: BFW (Bloomberg First Word)
People
Bert Lourenco (HSBC Securities Inc)
Giuseppe Maraffino (Barclays PLC)
Nishay Patel (UBS Global Asset Management Japan Ltd)
Parisha Saimbi (BNP Paribas SA)
To de-activate this alert, click here
UUID: 7947283