HALISTER1: Hedge Longs in Non-Core EGBs Via ATM Puts Ahead of ECB: BNP

Hedge Longs in Non-Core EGBs Via ATM Puts Ahead of ECB: BNP

(Bloomberg) -- Long ATM puts on 10y BTP, and even Bonos, ahead of ECB meeting make sense as protection for structural long positions in non-core euro-area bonds, BNP Paribas strategist Eric Oynoyan writes in client note.
  • Cash volatility on 10y BTPs and Bonos has increased since early 2016 but remains well below 2Q 2015 levels
  • In a context of volatile risky assets, rising political uncertainty among non-core countries and very low core yields, it makes sense to hedge against an upward correction in EGB yields after the March ECB meeting
  • Positive monthly change in net EGB supply from April to May will be the biggest change of the year
  • With non-core normal volatility likely to rise further in coming weeks, a long 10y put on 10y BTPs or Bonos around 100bp offers better protection than a simple sell of ATM calls
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Eric Oynoyan (BNP Paribas SA)

To de-activate this alert, click here

UUID: 7947283