Halister News

(Bloomberg) -- Sell EUR short-end as rates can’t stabilize until ECB easing is priced out; that said, there’s not that much left to price out, Citigroup strategist Harvinder Sian writes in a client note.

• Retain bund yield near-term target of ~0.05%; expect mild rise in bund yields during the second half of 2016
  • ECB will be running out of bunds to buy after the move to expand QE to EU80b per month
  • If corporate buying mimics the BOE’s problems and is only EU5b per month, then bund limits may be reached in 4Q 2017
• Favor flatteners as upsizing has a duration effect and positions are light; periphery is bullish and real rates remain especially high here
• ECB buying corporate bonds squeezes this market and makes euro issuance more attractive for non-residents, resulting in long-end EURUSD cross-currency basis wideners