Halister News

(Bloomberg) -- Expect the EGB index duration to extend by 0.06 yrs at the end of Sept., the average change for the month in five years, which should be supportive for the 10yr+ part of the curve, Citi strategists including Aman Bansal write in a client note.

• Weighted duration change is most relevant for extensions, and on this basis, the French index is projected to extend the most, closely followed by Italy, driven by an increase in weight of both constituents in the index
• Among the individual country indexes, Finland should see its largest extension in more than a year as a result of supply and RFGB 09/2017s dropping out of the index
  • Austria, Belgium are also expected to extend by a large amount
• Gilt index is expected to extend by 0.35 yrs at the end of Sept., largest extension in three years
  • Extension mainly driven by GBP32b of bonds dropping out of the index and issuance of the new gilt 07/2047
• Treasury index to extend by 0.10 yrs at end of Sept.

INFLATION-LINKED BONDS

• European Inflation-linked Securities Index is projected to extend by 0.24 yrs at the end of Sept., which would be the 2nd largest extension in a year
  • In terms of weighted duration changes, month-end changes should be broadly supportive for all the four constituents, led by France
  • French index should extend by its fourth-largest amount in three years

• 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 re- balancing: Citi