HALISTER1: Sell Bund vs UST in Indirect Bearish Trades in Europe: Barclays

Sell Bund vs UST in Indirect Bearish Trades in Europe: Barclays

(Bloomberg) -- Recommend investors do not rush to fade the bund selloff; instead, use indirect duration trades such as short 10Y bunds vs USTs, short bund ASW vs Eonia to express a bearish bias on EUR rates, Barclays strategists including Cagdas Aksu write in client note.
  • Maintain indirect short bias given:
    • Unlikely to see further ECB easing anytime soon
    • Upcoming redemptions, greater QE have been well flagged; from May onward, supply/demand dynamic turns much less market-friendly
    • EUR breakevens are little changed vs U.S. 5Y5Y fwd breakevens
    • 10Y bund yields already reflect decent amount of risk premium for U.K. referendum
    • As a result of low yield lvl, EGB issuers continue to be active in the sector in an effort to extend duration
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Cagdas Aksu (Barclays PLC)

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