HALISTER1: AUCTION PREVIEW: 5Y DSL Unlikely to Swap; Value vs Bunds, RAGBs

AUCTION PREVIEW: 5Y DSL Unlikely to Swap; Value vs Bunds, RAGBs

(Bloomberg) -- Netherlands to sell 0% 01/2022 for EU4b-6b via DDA, books open at 10am CET. Analysts highlight cross-market trades for the new DSL, vs Germany and Austria; unlikely to be swapped.
  • Rabobank (strategists including Richard McGuire)
    • Don’t anticipate auction bond to be swapped as DSTA strives to achieve its average maturity target
    • Given bullish backdrop for rates, flattening pressures will continue to move along the curve; favor using auction to move along curve, pick up duration
    • New 5Y issue will be welcome given the lack of free- floating bonds in other issues in this sector
  • ING (Martin van Vliet)
    • Make sense to use DDA to box 5s10s DSL steepeners vs German flatteners; trade benefits from lingering repo specialness of 10Y bund, also likely tap of the DSL 07/2026 next month
  • SocGen (Marc-Henri Thoumin)
    • 5Y DSL vs RAGB has widened by ~6bps since mid-April while 2Y, 10Y spreads have remained stable; recommend buying new 5Y DSL vs RAGBs at -4bps, target -9bps, stop 0bps
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Richard McGuire (Rabobank International)
Marc-Henri Thoumin (Societe Generale SA)
Martin Van Vliet (ING Groep NV)

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