Halister News

(Bloomberg) -- Issuance at extra-long tenors is likely to slow significantly over the coming months; favor long-end Spain, OATs and BGBs versus swaps, UniCredit strategist Elia Lattuga writes in client note.

• Supply to slow given EMU sovereigns have already met about half of their target funding needs for 2016, and as U.K. referendum and summer illiquidity approach
• See better opportunities in 30Y20Y on the Spanish curve
  • For those willing to take on slightly higher credit exposure, 50Y Spain still offers over 3.35%
  • 30Y20Y position would deliver very high 4.2%; higher than PGB Feb. 2045 yield
  • 30-50Y spread on credit curve is over 60bp, making extra-long end of Spanish curve very attractive in credit-spread term
• 30Y20Y or 50Y on the French and Belgian curves vs swap trading at interesting levels
  • Credit curve on 50Y tenor is ~40-45bp cheaper vs 30Y
  • 50Y credit spread attractive in historical terms and 30-50Y has steepened steadily since the beginning of the year, before stabilizing more recently