HALISTER1: Long 3Y Germany, EMU Spread Tightener Into ECB Meeting: JPMorgan

Long 3Y Germany, EMU Spread Tightener Into ECB Meeting: JPMorgan

(Bloomberg) -- Expect ECB to surprise positively; heading into meeting, recommend holding long 3Y Germany, EMU spread tighteners and bias for steeper 2s10s curves, writes JPMorgan strategists including Fabio Bassi.
  • Expect ECB to deliver more than consensus; 20bps depo cut, EU10b increase in pace of QE, extended by 3 months
  • Most ECB easing to occur by the end of 2016; hold Dec-16/Dec-17 Euribor curve steepener
  • 5Y sector rich on swap curve; favor paying 2s5s10s, would look to fade any further richening post-ECB
  • In core, expect Belgium to continue to underperform as maturities up to 7Y trade too close to better-rated, more liquid issuers; stay underweight
  • Portugal spreads continue to retrace; bonds don’t offer much value at current levels given concerns about fiscal trajectory, macro outlook, market volatility
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)
JPM US (JPMorgan Chase & Co)

People
Fabio Bassi (JPMorgan Chase & Co)

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