BofA Recommend Long 10s

Bank of America turn long Bunds recommending a long 10-Year entry at 2.72%, targeting a move to 2.00%, with a stop set at 3.10%.

• They note “we have held a near term bearish bias on Bunds for over a year, but the rationale behind that view evolved over time, lately leading us to think that the peak in yields would happen in 4Q23.”
• “What prevented us from expressing a long duration view were momentum and technicals, which appeared to us as the most likely explanation behind the last leg of the Bund selloff.”
• “It is now clear that the geopolitical developments over the weekend represent a big challenge to technicals and bearish momentum. Although real money's positioning may still be long, we believe the environment is now conducive to the build-up of additional longs, while fast money and CTA short positions may face stop outs. The last instances of elevated EGB weekly supply this year may thus be well absorbed.”
• They caution “the risks to the trade are positive Eurozone data surprises, a reduction in long positioning from real money investors ahead of the Q1 European Government bond issuance pick-up and a renewed large U.S. Tsy sell off.”