HALISTER1: Buy EUR CMS Range Accrual on Low-for-Longer Rates: Commerzbank

Buy EUR CMS Range Accrual on Low-for-Longer Rates: Commerzbank

(Bloomberg) -- With little evidence that ECB policy accommodation is driving inflationary trends in the euro area, long-end IRS could stay low for long given structural factors increasingly gaining weight, Commerzbank strategist Markus Koch writes in client note.
  • Long-term investors are advised to scale into a range accrual
  • To express the view of rates staying low for longer, the structure references the 10y CMS rate over 12-year term
  • If the index fixings are no higher than 3% or lower than 0% for the next 12 years, coupons of 2.3% p.a. are on the cards
  • Intriguingly, it suffices for the coupon condition to be met during merely 5 years to break even with current, matched- maturity swap rates
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Source: BFW (Bloomberg First Word)

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2539Z GR (European Central Bank)

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Markus Koch (Commerzbank AG)

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