Cagdas Aksu at Barclays recommends staying.....>

EGBS: Cagdas Aksu at Barclays recommends staying short 5Y on a EUR swap 2-5-10Y

fly.

- The fly remains directional and should remain so.

- Barclays sees the average the average maturity of Bundesbank purchases

gradually increasing, keeping flattening pressure 5Y+.

- Divergence of views among ECB board member should price in more term premium

and push 2 to 5Y steeper.

- Aksu adds "the carry profile of the trade is also less punitive than outright

flatteners at the back end of the EUR curve (ie, 10s/30s), which should also do

well in a belly-led sell-off correction."

- Barclays also recommend staying short France vs OIS. Last week Barclays say

there was a short squeeze that helped OATs outperform but "the market currently

feels cleaner in its positioning in France. This, together with expensive

valuations, next year's heavy net issuance pipeline and the broad expensiveness

of German ASWs, makes us continue hold onto our short 10y France versus EONIA

trade"