HALISTER1: Buy Bund July 2044 vs August 2046 on ECB Issue Limit Move: Citi

Buy Bund July 2044 vs August 2046 on ECB Issue Limit Move: Citi

(Bloomberg) -- Most likely consensus on addressing bund scarcity problems is likely to surround an increase in the issue limit for non-CAC bonds, Citigroup strategists, including Harvinder Sian, write in client note.
  • Buy bund July 2044 vs Aug. 2046 at 3bps; target 7bps, stop 1bp
  • Risk to the trade emerges from a broader flattening move outweighing the relative value steepening bias of this trade, even if current spreads are already at the flat end of the historic range
  • Spread jumped to 7bps soon after the ECB announced PSPP on Jan. 22, 2015 and the 2-year to 30-year eligibility range implied that Aug. 2046 might not be eligible
  • Furthermore, July 2044 is the only bund without the CAC which is still being reopened and is therefore among the most liquid non-CAC Bunds
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Harvinder Sian (Citigroup Inc)

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