HALISTER1: AUCTION PREVIEW: OBL April 2021 Seen Supported on Attractive RV

AUCTION PREVIEW: OBL April 2021 Seen Supported on Attractive RV

(Bloomberg) -- Germany to reopen OBL April 2021 for EU4b at 11:30am CET, with analysts seeing demand given attractive levels amid recent underperformance in cross-country terms.
  • BofAML (Erjon Satko)
    • April 2021 is offering over 2bps of yield pickup on the z-spread vs the earlier benchmark Oct. 2020; highest since the launch of the bond on April 2021 in Feb.
    • Demand may be supported as this would be the last reopening of the April 2021
  • Citigroup (Puja Sawant)
    • Limited relative value on the domestic curve and on ASW
    • However, on a cross-market basis, prefer the deeper sovereign market to agencies where spreads in the 5Y sector have compressed to low single digits
    • Trading at cheapest level vs RFGB April 2021s and RAGB Sept. 2021s over a 4-mo. history
  • Commerzbank (Michael Leister)
    • Expect good demand for today’s tap
    • 5y sector of the bund curve looks rich with the directional outperformance of the belly taking the 2s5s10s fly to March lows
    • RV is attractive though, particularly with the roll vs off-the-run OBL Oct. 2020 having consistently widened over the past months
    • 5y OBLs have also underperformed in cross-country terms, with spreads and credit flies vs (semi-)core back around the tightest level year-to-date
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Erjon Satko (Merrill Lynch International)
Michael Leister (Commerzbank AG)
Puja Sawant (Citigroup Inc)

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