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Citi Have Slightly Bullish Bias For Futures Roll

BTP

Citi are “slightly bullish on the IKZ3/H4 roll and therefore suggest longs roll late and shorts roll early.”

  • They flag that “the primary driver for the upcoming IK roll is the CTD optionality in the front and back contracts.”
  • “According to our calculations, a 20bps parallel sell-off across the deliverable basket will result in a CTD switch from BTP May33s to Nov33s in the front contract.”
  • “For the back contract, a 15bps parallel sell-off will result in a CTD switch to BTP Mar34s.”
  • “A general increase in yields will make a CTD switch more likely in the back contract due to the longer time to expiry and should result in a larger delivery option value, in our view.”
  • “This is a slightly bullish factor for the roll.”
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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