Halister News

(Bloomberg) -- Still geared for lower rates as low inflation continues and more ECB action is expected by Sept., Citigroup strategists including Harvinder Sian write in note.

• Bund selloff seen as tactical but keep an eye on the regulatory treatment of bank sovereign holding at the Ecofin meeting
  • Policy makers are leaning toward large exposure limits and this will mean a large amount of bonds need to change hands
• Enter EUR 2y fwd 10s30s steepener; target 40bp, stop 10bp, roll +14bp over 12-mo.
  • Rationale for the trade is stable outlook for long end making carry trade attractive in forwards
  • Risk is largely orientated around risk-asset collapse
• Enter 10s30s RPI steepener; target 40bp, stop 19bp
  • Scale of recent flattening looks excessive vs usual beta
  • Long-term stability of the range for 10s30s RPI suggests it may begin to turn
  • It is not obvious that there will be a sudden resurgence in structural demand for 30y RPI