HALISTER1: Lack of Supply Not Enough for More EUR Breakeven Rally: Citi

Lack of Supply Not Enough for More EUR Breakeven Rally: Citi

(Bloomberg) -- Seasonals do not look supportive for EUR breakevens in August while negative carry in September is also likely to weigh in the near-term, Citigroup strategists including Aman Bansal write in client note.
  • Do not think lack of supply will be enough for a further meaningful rally in breakeven
    • Germany and France do not hold linker auctions in August and Italy has canceled end-August auction
  • Sell OATei27 breakeven vs Bundei26 at 23bp; target 10bp, stop 30bp
  • OATei27-Bundei26 breakeven spread is now trading at its highest level in a year
  • OATei breakevens tend to sell-off most in Aug.
  • Risks: next German supply on Sept. 6 announced in Bundei26; OATei27 is trading at the extreme end of its relatively well-behaved range vs BTPei23, a combination likely to benefit from seasonals the most
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Aman Bansal (Citigroup Inc)

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