Buy USD 3m5y Payers, Sell EUR 3m3y2y Mid-Curve Payers: SG
Source: BFW (Bloomberg First Word)
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Adam Kurpiel (Societe Generale SA)
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UUID: 7947283
(Bloomberg) -- Potential for further upward repricing of Fed rate hike expectations driven by USD belly; directional potential remains weak in intermediate maturities of the EUR curve, anchored by accommodative ECB and upcoming TLTROs II, Societe Generale strategist Adam Kurpiel writes in client note.
Alert: HALISTER1- Buy USD 3m5y payers, sell EUR 3m3y2y mid-curve payers
- Cost of the trade is ~5bp running indicative, almost two times less than buying USD 3m5y ATMF payer vs EUR 3m5y
- Assuming that the EUR 3y2y remains below its 3m3y2y forward, the USD 5y needs to move up by ~11bp for the strategy to breakeven (~6bp of rolldown plus ~5bp of the premium)
- Risks: Sharp increase in the EUR 3y2y vs USD 5y; if both USD and EUR rates remain below their 3-mo. forwards, the strategy loses the premium paid at inception
Source: BFW (Bloomberg First Word)
People
Adam Kurpiel (Societe Generale SA)
To de-activate this alert, click here
UUID: 7947283