EUR FRA/OIS and 5Y5Y 3s6s Basis to Widen: BofAML
Source: BFW (Bloomberg First Word)
People
Ruairi Hourihane (Merrill Lynch International)
Sphia Salim (Bank of America Corp)
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UUID: 7947283
(Bloomberg) -- TLTRO-2, corporate issuance and richness of bonds vs OIS should see renewed widening of EUR FRA/OIS and 5Y 3s6s basis, Bank of America Merrill Lynch strategists Sphia Salim and Ruairi Hourihane write in a client note.
Alert: HALISTER1- BofAML favors March 2017 FRA/OIS and 5Y5Y 3s6s basis widening
- Enter March 2017 FRA/OIS widener at 6.25bps, targeting 10bps, with stop-loss at 4bps
- Relationship between widening FRA/OIS and deterioration of bank credit-worthiness has broken down, with spread tightening since end of June, as dealers hedge flows
- Euribor reform in June 2017 may also limit further tightening pressures
- Buying of government bond futures vs OIS has been a key driver; hedging these flows has led to tightening FRA/OIS
- Bond futures now look very rich again vs OIS, which could see reversal of tightening trend
Source: BFW (Bloomberg First Word)
People
Ruairi Hourihane (Merrill Lynch International)
Sphia Salim (Bank of America Corp)
To de-activate this alert, click here
UUID: 7947283