AUCTION PREVIEW: 20Y Gilt Lacks Outright Concession
Source: BFW (Bloomberg First Word)
People
Simon Peck (Royal Bank of Scotland Group PLC)
Adam Dent (Abbey Natl Treasury Services)
Jamie Searle (Citigroup Inc)
Marc-Henri Thoumin (Societe Generale SA)
Saumesh Dutta (Citigroup Inc)
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UUID: 7947283
(Bloomberg) -- U.K. to sell 4.25% 03/2036 for GB1.5b at 11:30am CET. Analysts highlight the lack of outright concession in the bond, though see value of the sector on 10s20s30s fly.
Alert: HALISTER1- RBS (Simon Peck)
- Little outright concession given recent rally, sector has cheapened ~7bps on 10s20s30s fly since start of May, starting to look attractive on this basis
- 20Y area lacks natural buyers vs others; supply is relatively heavy in the sector this quarter, backdrop potentially more challenging than usual
- In event of rising Brexit risk, 20Y may outperform on anticipation of further QE; sector has tended to outperform in QE buybacks
- Citi (Saumesh Dutta, Jamie Searle)
- 20Y yields have rallied strongly over past fortnight, now trading mid-range vs recent history
- Bond has cheapened slightly vs peers over past 2-months; much better RV found in 10s20s30s fly, which has cheapened sharply over past week
- PCA analysis shows relative cheapness of 15Y/20Y curve; 03/2036 is second-cheapest bond in the sector
- Gilts have outperformed bunds, USTs recently, though 20Y sector has been lagging, presents opportunity
- Santander (Adam Dent)
- Gilt yields low, range-bound, unlikely to break out soon; 20Y looks fair on the wider curve, given the steepening seen in 10s30s
- Bond at the cheap end of tight range vs peers; long-end gilt spreads have all been drifting tighter, though this may slow
- SocGen (Marc-Henri Thoumin)
- Relatively light auction, DV01 of just £2.88m; 20Y point has underperformed, sits close to cheapest levels for the year, some rebound is likely once auction has passed
Source: BFW (Bloomberg First Word)
People
Simon Peck (Royal Bank of Scotland Group PLC)
Adam Dent (Abbey Natl Treasury Services)
Jamie Searle (Citigroup Inc)
Marc-Henri Thoumin (Societe Generale SA)
Saumesh Dutta (Citigroup Inc)
To de-activate this alert, click here
UUID: 7947283