HALISTER1: EGB Flatteners in Favor on Large Month-End Extension: Citi

EGB Flatteners in Favor on Large Month-End Extension: Citi

(Bloomberg) -- Support from month-end duration changes could provide technical trigger for a corrective flattening in euro-area bond curves, Citigroup strategist Aman Bansal writes in client note.
  • Impact of supply on the index duration in January 2017 is set to be the highest in four years
  • 30-year sector should find the most support on the curve in Austria, the Netherlands and Ireland
    • On the Irish curve, 05/2026 is the richest bond in the 10y sector, while 02/2045 is the only 30y bond; the spread between the two is at historically steep levels
    • On the Dutch curve, prefer to express the flattening view in 10s15s, given the cheapness of the 01/2033 vs surrounding issues
    • Month-end changes should be very supportive for both 10y and 30y, while the most expensive RAGBs are in the 5y sector, best flattening trade on RAGB curve in 5s30s
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Source: BFW (Bloomberg First Word)

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Aman Bansal (Citigroup Inc)

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