HALISTER1: Last Year’s Bund Selloff Unlikely to Be Repeated: CS

Last Year’s Bund Selloff Unlikely to Be Repeated: CS

(Bloomberg) -- Move in 10Y German yields “will be limited,” even as they “appear to be tracing a similar path” as in late April 2015, when they began an increase of nearly 100bp by early June, and there are key similarities, Credit Suisse strategists led by Praveen Korapaty say in note.
  • Bund yield will rise ~15bp over rest of qtr
  • Similarities include rising implied bund vols, end of a period of “deeply negative net supply” for euro-zone sovereign debt, unfavorable carry-to-vol ratio and improved economic growth outlook
  • These are offset by:
    • More favorable net supply picture on the whole than in 2015
    • Carry-to-vol ratio “still better than it was last April”
    • Oil prices y/y will be negative over next few mos
    • Positioning “appears far more balanced” vs yr-ago
    • Inflation breakevens, while off lows, remain in line with historical relationship with nominal yields
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Praveen Korapaty (Credit Suisse Group AG)

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