HALISTER1: Sell EUR Rates Optionality to Enhance Coupon Value: Commerzbank

Sell EUR Rates Optionality to Enhance Coupon Value: Commerzbank

(Bloomberg) -- Investors seeking to stabilize long-term portfolio returns and/or cash flows to better match minimum income requirements are advised to sell optionality, Commerzbank strategist Markus Koch writes in client note.
  • Recommend buying 2.42% single callable note with a 30y term
  • Specifically, single call right following 6y lockout period (NC6) adds value to ultra-long notes
    • All considered (maturity, lockouts, funding), analysis suggests that 30y tenor with a 6y lockout appears to be the sweet spot
  • EUR vega vols in ultra-long tails is proving resilient despite collapsing IRS
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Markus Koch (Commerzbank AG)

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