HALISTER1: EUR 5s7s, 10s15s Flatteners Favorable Before ECB: Credit Suisse

EUR 5s7s, 10s15s Flatteners Favorable Before ECB: Credit Suisse

(Bloomberg) -- Best positions ahead of ECB’s March meeting are a combination of EUR curve flatteners, long carry trades in the periphery and short core rates via selling OTM bund calls, Credit Suisse strategist Florian Weber writes in a client note.
  • Favourite curve flatteners are EUR 5s7s and 10s15s, which are are trading too steep for the level of rates
    • Expect an acceleration of QE to flatten the curve; flow dynamics and bond scarcity concerns likely to overwhelm repricing of higher inflation expectations
  • In the periphery, favor being long the best carrying parts of the curve, such as 5s or 7s
  • Selling RXJ6C calls with strike above 164 attractive, given the elevated level of vol and outlook for Germany 10Y
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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2539Z GR (European Central Bank)

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Florian Weber (Credit Suisse Group AG)

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