HALISTER1: Use Recent Tightening to Add Short 10Y France vs Bunds: Barclays

Use Recent Tightening to Add Short 10Y France vs Bunds: Barclays

(Bloomberg) -- Dutch election results undershot worst fears from a populism perspective, yet uncertainty around French elections is unlikely to disappear until the second round has passed; initiate short 10y France vs Germany, writes Barclays strategists including Cagdas Aksu in a client note.
  • Given much bigger negative consequences of a Le Pen victory from a markets’ perspective, this is not a risk that will be priced out soon
    • 10y French spreads currently at around 60bp are not too far from where they would be even if Le Pen loses (project ~50bps)
  • Recommend closing 10y Austria–Germany wideners trade, and initiate short FRTR 0.50% 05/2026 vs DBR 0% Aug 26
    • Keep EGB widening view in the form of short 10y Spain vs Germany; even if Le Pen’s prospects diminish in coming weeks, ECB’s less dovish stance should help keep a high risk premium in EGB spreads associated with ECB normalization

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Cagdas Aksu (Barclays PLC)

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