AUCTION PREVIEW: 5Y Gilt Concession Is Seen Through 2s5s10s Fly
Source: BFW (Bloomberg First Word)
People
Jamie Searle (Citigroup Inc)
Marc-Henri Thoumin (Societe Generale SA)
Saumesh Dutta (Citigroup Inc)
Sebastien Cross (Merrill Lynch International)
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UUID: 7947283
(Bloomberg) -- U.K. DMO will issue GBP2.75b of 1.5% 2021 at 11:30am CET. Analysts highlight the concession in the bond, seen through the cheapening of the 2s5s10s fly.
Alert: HALISTER1- BofAML (Sebastien Cross)
- Expect auction to be well covered given the relatively low level of risk being delivered to the market
- Furthermore, the UKT 8% 2021 will drop into the sub-5y indexes in June, but the bond is likely to remain hard to source given that the BOE hold 70% of the amount outstanding
- Therefore, auction of the UKT 1.5% 2021 an easier opportunity for those following the under-5y indexes to extend duration
- Citi (Saumesh Dutta, Jamie Searle)
- Auction concession is evident from the cheapening of the 2s5s10s gilt fly, the cheapness of Jan. 2021 vs a PCA fitted curve, and the 5y UK-Germany spread which is at the top of its YTD trading range despite both facing supply today
- SocGen (Marc-Henri Thoumin)
- 1.5% Jan. 2021 looks 4-5bp cheap to a line of best fit through z-spreads in the 2019-24 segment of the curve
- 5y part of the curve has also cheapened on the 2s5s10s fly as yields have backed-up
- Suggest buying the 1.5% Jan. 2021 on asset swap vs the previous 5y, the 2% July 2020
Source: BFW (Bloomberg First Word)
People
Jamie Searle (Citigroup Inc)
Marc-Henri Thoumin (Societe Generale SA)
Saumesh Dutta (Citigroup Inc)
Sebastien Cross (Merrill Lynch International)
To de-activate this alert, click here
UUID: 7947283