HALISTER1: Receive 5y5y EUR Inflation vs U.S. as Seasonal Carry Fades: BNP

Receive 5y5y EUR Inflation vs U.S. as Seasonal Carry Fades: BNP

(Bloomberg) -- With the period of strongest seasonal carry now coming to an end, inflation products are suffering, BNP Paribas strategist Parisha Saimbi writes in client note.
  • Receive 5y5y EUR inflation swap forward vs paying 5y5y U.S. inflation swap; target 35bp, stop 60bp, carry 0bp/month
  • EUR 5y5y inflation breakevens have made new lows, keeping up with the decline in the USD 5y5y breakevens
  • Given this, recommend legging the long 5y5y EUR BEI into a spread of -51bp vs U.S. 5y5y BEI
  • This improves the carry from -13bp/year for the outright long to almost flat for the spread
  • Close long 5y and 5s10s EUR real-yield steepener recommendations, as the spot levels have risen to their forwards, accurately pricing in the carry earned
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Parisha Saimbi (Bnp Paribas)

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