Bundesbank Remuneration Tweak Puts Bid Into Schatz, Scarcity Talk Is Back

Plenty of questions surrounding the bid in Schatz futures and comfortably above average volumes seen in the contract in Asia-Pac hours (running at ~68K as of typing).

• As a driver, we point you to Friday’s late Bundesbank announcement noting that “the Bundesbank’s Executive Board has decided to remunerate domestic government deposits held with the Bundesbank at 0% again as from 1 October 2023.”
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• Commerzbank note that the move “constitutes a big surprise. Another BuBill run cannot be excluded and scarcity speculation looks set to intensify further in coming months.”
• Still, they believe that “the Finanzagentur should continue to provide sufficient collateral to the market and stand ready to counter disruptive scarcity if needed.”
• To sum up, they write “for the coming weeks, we sideline our strategic ASW-tightener and adjust our longs in Schatz- vs. Bund-spreads and BuBills vs. BKOs to outright widener vs. €STR. We also recommend outright longs in the Schatz as we expect the ECB to pause in September.”