Bund Recovery on Track But Overshoots May Fade Into Jackson Hole
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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UUID: 7947283
(Bloomberg) -- Downside bund skew may richen with futures having reached the flagged target area and with any overshoots in the early half of August -- due to summer seasonality and fall in EGB supply -- likely to be faded ahead of the Aug. 24-26 Jackson Hole summit.
- August may see the second-lowest monthly EGB supply of 2017 after December as supply dries up after tomorrow’s EU6.5b OAT sale, when bunds are at risk of extending higher with upside potentially capped at 163.50 (0.44%) before the resumption of the selloff toward 0.72%
- Bund downside skew may richen ahead of the next major event risk -- Jackson Hole and ECB meeting on Sept. 7; see chart here of September skew where downside has richened over the last couple of days
- NOTE: While the fair value for bunds was only modestly rich prior to Sintra (vs extreme valuations prior to 2015 bund VaR shock), a further selloff toward 70bps area may see bunds cheapness stretched given diminishing inflation risk
- NOTE: Tanvir Sandhu is an interest- rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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To modify this alert, click here
UUID: 7947283