HALISTER1: Brexit Means ECB Rates Low for Longer But Not Deep Cuts: SG

Brexit Means ECB Rates Low for Longer But Not Deep Cuts: SG

(Bloomberg) -- ECB rate cuts in excess of 10bp are unlikely given their negative side effects, and focus will remain on the necessary PSPP redesign, Societe Generale strategist Adam Kurpiel writes in client note.
  • Buy EUR 3m10y ATMF receivers, sell 3m2y ATMF receivers, PV01-weighted
  • Conditional EUR 2y10y bull-flatterers allow for fading the richness of the EUR front end with no exposure to bear- steepening
  • Risk: EUR 2y rate decreasing on the back of even more aggressive ECB rate-cut expectations with a more stable EUR 10y rate would lead to a risk of unlimited losses at expiry
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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2539Z GR (European Central Bank)

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Adam Kurpiel (Societe Generale SA)

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