Halister News

(Bloomberg) -- Expect new lows in bund yields aided by scarcity issues; peripheral EGBs face near-term headwinds from Brexit risk and Greek discussions but should ultimately trade lower in yield, Citigroup strategists including Harvinder Sian write in a client note.

• Unlikely that the temporary end of Chinese deflation will see ECB staff projections revert to mandate consistent inflation
• Further ECB policy iterations are likely in Sept. which in turn locks down lower-for-longer and scarcity issues for bunds
• Other rates ideas from Citigroup:
• Buy Bundei46 break-even vs OATei40; target -4bp, stop -18bp
  • OATei will contend with supply pressure with upcoming April 21 auction
  • Risk emerges from further flattening of the 10s30s breakeven curve
  • Alternatively, consider expressing this view in real yields
• GBP 2s5s steepener; target 50bp, stop 7bp, carry -0.9bp/3- mo.
  • Simple expression of the idea that BOE hiking cycle is more likely than a cutting cycle, regardless of Brexit
  • Risk is that the front-end and inflation expectations recouple via a reversal in the latter possible if this weekend’s OPEC meeting disappoints market expectations
• EUR rates bottom-right vega expected to remain range-bound, see more here