Sell German 5-Year on ECB Outlook, Net Supply Jump, BNP Says
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
Tickers
2539Z GR (European Central Bank)
People
Eric Oynoyan (BNP Paribas SA)
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UUID: 7947283
(Bloomberg) -- Recommend selling German 5y at -26bps as the expected summer rally is losing steam and the prospect of ECB policy adjustments should see a gradual rise in core yields, BNP Paribas strategists including Eric Oynoyan write in a note.
- Two major shocks will affect the belly of the curve:
- Repricing of the forward Eonia curve, as BNP expects a full normalization to 0% in 2H 2018
- ECB-dated OIS rates currently price for just ~9bps of rate rises by end of 2018
- Change in net supply from -EU269b after PSPP in 2017 to slightly positive in 2018, assuming QE buying ends by summer 2018; this dislocation in supply and demand warrants higher core yields
- Repricing of the forward Eonia curve, as BNP expects a full normalization to 0% in 2H 2018
- Sell German 5y 10/2022 at -26bps, target -10bps, stop -36bps, carry and roll -2.1bps/month
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
Tickers
2539Z GR (European Central Bank)
People
Eric Oynoyan (BNP Paribas SA)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283