HALISTER1: Optimize Mild Bullish EUR Rates Trades on Back-Up in Yields: SG

Optimize Mild Bullish EUR Rates Trades on Back-Up in Yields: SG

(Bloomberg) -- Recent back-up in yields and cheap EUR rates volatility is an opportunity to set conditional bullish trades, Societe Generale strategist Adam Kurpiel writes in client note.
  • Buy EUR 6m5y2y ATMF/ATMF-25bp receiver spread
    • Maximum payout capped at 25bp unless EUR 5y2y forward rate decreases in the next 6-mo. by more than 40bp and well below last year’s lows
    • 1x1 receiver spread achieves better leverage (payout to premium ratio) than simple ATMF receiver
  • Durably accommodative ECB, ongoing asset purchases and looming near-term risks imply there is value in benefiting from the recent bearish move to reset conditional carry trades and bull-flatteners ahead of the summer break
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Adam Kurpiel (Societe Generale SA)

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