Halister News

(Bloomberg) -- Effective duration of European Govt Bond Index expected to extend by 0.10yrs at the end of July, which is greater than the 5-year median change, Citigroup strategists Saumesh Dutta and Aman Bansal write in client note.

• Larger-than-average extension driven by increased amount of bonds dropping out of the index; changes to be broadly supportive for EGBs, particularly 10Y+ sector
• Projected changes very supportive for France, biggest beneficiary from weighted duration change, as a result of almost EU9b of issuance in 15Y+ sector
  • Weighted duration change is most relevant for EGB portfolios; France extends the most, second largest in two-years, followed by Italy
• Among individual countries, Dutch index is projected to extend by its second largest in two years, as one EU13b issue drops out; expect support for 10Y-30Y Netherlands

• NOTE: Weighted duration of a country is calculated as (market value of country) x (effective duration) / (market value of EGBI)
  • Very significant for EGBI portfolio managers as they attempt to keep it unchanged through month-end rebalancing: Citi