Halister News

(Bloomberg) -- Very likely that peak in bund yields has been seen around 0.30%, BNP Paribas strategists including Eric Oynoyan write in client note.

• However, in near term, a rebound of oversold risk assets could trigger a setback in yields
• BNP recommends using any move close to 0.65% as an opportunity to re-enter EUR 10y swap receiver with medium- term target of 0.25%
• Maintains thesis that in the present ultra-low yield environment, carry becomes increasingly valuable and sought- after
• Carry is highest in sub-5-year U.S., around 5y in U.K. and in 5-10y in EUR
• Recommends waiting for a setback on the EUR 5s10s swap curve to ~50bp to receive it targeting low 30s, or a return of the EUR 5s10s30s swap fly to 5-6bp area targeting -10bp
  • Current backdrop of gradual rebound of inflation expectations and no rebound in volatility doesn’t favour an outperformance of the long end of curves
• Long German ASW via Buxl ASW; recommendation at 32bp, target 40bp
  • Investors constrained by the maturity could enter the long on the 5y bucket at 38bp and add on any move to 36bp, targeting 43/45bp by mid-July, 34bp stop