Scale Into USD Bear Steepeners on Risks to Flattening Bias: SG
Source: BFW (Bloomberg First Word)
People
Bruno Braizinha (Societe Generale SA)
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UUID: 7947283
(Bloomberg) -- Scale into USD 1y forward 5s30s bear steepener expressed by buying 1y30y payer spreads (ATM/3.05%) financed by selling 1y5y payer ATM, Societe Generale strategists including Bruno Braizinha writes in client note.
Alert: HALISTER1- Sell 250mm 1y5y payer ATM
- Buy 50mm 1y30y payer ATM
- Sell 50mm1y30y payer 3.05% (~130bp out of the money)
- Carry is positive by ~2.5bp/6m
- Position profits on a bear-steepening scenario for the 5s30s curve beyond the 50bp entry level, where both the short 5y payer leg and the long 30y payer leg expire in the money
- Continue to hold a flattening bias, with a 3-9-month horizon; however, steepening risks on:
- Fading appetite for USTs and some indication of a structural shift in demand for duration in dollars
- U.S. election cycle and the Trump factor
- Extension of ECB asset purchases beyond March 2017 but with a tapering of purchases over a 9-month period to end-2017
Source: BFW (Bloomberg First Word)
People
Bruno Braizinha (Societe Generale SA)
To de-activate this alert, click here
UUID: 7947283