HALISTER1: Yields Have Risen Enough, Buy EUR 3m10Y Risk Reversals: BNP

Yields Have Risen Enough, Buy EUR 3m10Y Risk Reversals: BNP

(Bloomberg) -- Rise in yields has already gone far enough, recommend long EUR 10Y via 3-month expiry risk reversals, BNP strategists including Patrick Jacq write in a client note.
  • Sell 0.84% (14bps OTM) 3m10Y payer vs buying 0.57% (12bps OTM) receiver at zero cost
  • Preliminary German inflation data suggest further falls in euro area, central banks remain dovish, supply/demand dynamics remain supportive given ECB, BOJ QE
  • Bund correction close to its end, 10Y yields above 0.35% seen as overshooting; prepare to re-enter long 10Y bund outright in mid-30bp area
  • Stopped out of OAT 5s15s flattener, look to re-enter once bullish tone resumes
  • Spain has outperformed Italy, despite parties failing to form a govt; supply/demand favored SPGBs over BTPs in April, but this will reverse in May
    • Enter SPGB/BTP 10Y wideners at 6bps, target 20bps, stop -2bps
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Patrick Jacq (BNP Paribas SA)

To de-activate this alert, click here

UUID: 7947283