Halister News

(Bloomberg) -- Increased 5Y EUR linker issuance and reduced long-end supply support 5Y5Y inflation forward swaps, HSBC strategist Theologis Chapsalis writes in client note.

• Flatness of breakeven curves has attracted issuers at the front-end with France, Italy and Spain offering new benchmark linkers during the last 3 months
• This move should help the breakeven curve steepen and allow for higher 5Y5Y forward inflation swaps
• On RV, prefer SPGBei breakevens to those of BTPeis but investors seeking even higher DM real yields will have to look outside Europe and U.S.
  • SPGBei21 is ~6bp cheap vs SPGbei19 and SPGBei24 on a seasonally-adjusted BE butterfly, taking into account floor and maturity differentials
  • Italian domestic accounts have been more active with long ASW trades than their Spanish peers
• New Zealand is particularly interesting due to the level of real yields and the potential for further easing by RBNZ