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BUNDS: /SWAPS: Swap Spreads Remain Under Pressure, Fresh Cycle Lows

BUNDS
BundesbankCentral Bank NewsCEEMEAEurozoneGermanyBulletGlobalFixed Income BulletsRegionMarkets

Receiver-side flow in swaps, linked to the latest round of dovish ECB repricing, helps drive ASWs tighter once again, with the 4 major invoice spreads all on track to register fresh cycle closing lows.

  • The long end has taken the lead in recent sessions, flattening various ASW box structures.
  • Commerzbank previously noted that “the latest tightening leg seems to be driven by pressure on futures/cash, which is causing the collateral risk premium to evaporate so that ASW-spreads are now trading on par with specialness spreads vs €STR. At the same time, this raises the bar for further tightening below the zero line (in Schatz vs. €STR) in the absence of another collateral re-pricing.”
  • That ‘limitation’ in Schatz spreads will be helping the flattening seen in various ASW box structures, even as the DU/€STR invoice spread moves a couple of bp below 0.

Fig. 1: DU, OE, RX & UB Futures Invoice Spreads vs. €STR

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Receiver-side flow in swaps, linked to the latest round of dovish ECB repricing, helps drive ASWs tighter once again, with the 4 major invoice spreads all on track to register fresh cycle closing lows.

  • The long end has taken the lead in recent sessions, flattening various ASW box structures.
  • Commerzbank previously noted that “the latest tightening leg seems to be driven by pressure on futures/cash, which is causing the collateral risk premium to evaporate so that ASW-spreads are now trading on par with specialness spreads vs €STR. At the same time, this raises the bar for further tightening below the zero line (in Schatz vs. €STR) in the absence of another collateral re-pricing.”
  • That ‘limitation’ in Schatz spreads will be helping the flattening seen in various ASW box structures, even as the DU/€STR invoice spread moves a couple of bp below 0.

Fig. 1: DU, OE, RX & UB Futures Invoice Spreads vs. €STR

Keep reading...Show less