Halister News

(Bloomberg) -- Even though 10Y core EGB yields are very close to 2015’s record-low levels, the valuation metrics for the 10Y and the curve are completely different, BNP Paribas strategist Eric Oynoyan writes in client note.

• Maintain long duration call for the coming months, traded through a EUR 10Y swap receiver
• Continue to receive EUR 2s10s30s fly
• With BOJ’s U-turn on monetary policy, JGB yields are trading in negative territory up to the 10Y, which should support switches into USTs and EGBs
  • Start of the new fiscal year in Japan could see a gradual reallocation of assets out of JGBs into the liquid 10Y core euro bonds: OATs and bunds
• Pricing of risk assets differs completely from April 2015; most indexes have been in a bear market for a year now, which has had an impact on Fed monetary policy
  • Inability of euro-zone equity markets to rally further since the March ECB meeting combined with expensive U.S. stocks is another signal that the risk-on rally since mid-Feb. is already over, providing potential additional support to bonds