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BofA Recommend OATei 2029/2053 Real Curve Flattener

OAT

Bank of America believe that “the near-term carry appeal of real curve steepeners in EUR linkers should be resisted. Yes, they carry well to, say, a 3-month horizon, but the prospective carry to a 1-year horizon for real flatteners is far greater. And we regard a 1-year horizon as more important anyway, being seasonally neutral relative to the inception date.”

  • They go on to suggest that “the 5s30s OATei real curve looks too steep relative to short maturity real rates. This is at the heart of the carry story. Some might argue that there's been a regime shift - that the neutral real rate has risen, so a 1y real €STR rate of 1.25% is not that high and the real curve can steepen - but we beg to differ.”
  • As a result, they recommend an OATei 2029/2053 real curve flattener.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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