HALISTER1: Bunds May Rally More, NFP Pushes ECB Duration Extension: Citi

Bunds May Rally More, NFP Pushes ECB Duration Extension: Citi

(Bloomberg) -- Bunds can rally further as large chunks of the ECB pool become ineligible for QE, forcing ECB/Buba duration extension, Citigroup strategists including Harvinder Sian write in client note.
  • Rally has taken German 5y below the -40 bps depo, making
it ineligible; this adds to the EUR flattening bias as EU59b by market value drops out of the QE pool
  • That aids trades including 10y ASW wideners and contingent 3-mo. 10s30s floor
  • Being bullish into likely Sept. QE extension is a long-end bull flattener
  • Periphery has been lagging core but in outright terms see lower yields
    • RAGB/bund spread looks too tight and prefer BTPs over Bonos in the 8Y sector
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Harvinder Sian (Citigroup Inc)

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