HALISTER1: Bund Yields Unlikley to Rise Much Above 0.30%: BNP Paribas

Bund Yields Unlikley to Rise Much Above 0.30%: BNP Paribas

(Bloomberg) -- Closed outright EUR 10y swap receiver in light of the current correction in bunds, waiting for better levels to re-enter, BNP Paribas strategists including Eric Oynoyan write in client note.
  • Heavy redemptions and coupon payments could slow the pace of the correction
  • Moreover, current low premium on bunds suggests the 10y yield is unlikely to rise much above 0.30%
  • Next week, FOMC, BOJ, month-end index extensions, end of the month with most-negative net EGB supply and the DBRS Portugal rating update pose near-term risks to bond markets, but will not provoke a trend reversal in bonds
  • Overall, expect outstanding recommendations to weather a potential selloff
    • 2s5s USD steepener vs EUR flattener should offer protection against a less-dovish Fed
    • USD 3y forward 3s15s steepener and EUR curve trades – OAT 5s15s and BTP 10s30s flatteners – are only mildly bullish
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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BNP FP (BNP Paribas SA)

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Eric Oynoyan (BNP Paribas SA)

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