HALISTER1: Enter Small G-4 Duration Long, Target 0.05% on 10Y Bund: SocGen

Enter Small G-4 Duration Long, Target 0.05% on 10Y Bund: SocGen

(Bloomberg) -- Enter small long G-4 duration as financial-market stress unlikely to abate ahead of G-20 meeting (Feb. 26-27); target 0.05% in 10Y bund, SocGen strategists including Vincent Chaigneau write in client note.
  • Financial stress spreading from EM to DM; banking sector is major channel for contagion; investors losing faith in fiscal, monetary patches
  • Add back small long G-4 duration, after removing last week, see U.S. 10Y below 1.50%
  • Recommend paying EUR 5s10s30s fly; when 10Y rate moves below 0.75% fly changes directionality; renewed market stress would drive the fly up; enter at 5bps, target 12bps, stop -2.5bps
  • Re-weight toward soft core vs core, peripheral if 10Y BTP/Bund, SPGB/Bund spreads break above 2015 highs
  • Favor carry trades in short-dated BTPs, SPGBs; avoid longer dates, fear 2015 highs will be broken
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Vincent Chaigneau (Societe Generale SA)

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UUID: 7947283