Citi Turn Neutral On Bund ASWs

This morning Citi suggested that “the front-loading of EGB supply for 2024 is probably over. This has probably played a role in the correction wider in swap spreads over the last few sessions.”

• “The volume-weighted cost of repoing the front RX deliverables is unlikely to move sustainably higher going forward.”
• “Yet, the net supply profile for February and March (€3bn and €6bn, respectively - compared to €20bn for January) is unlikely to prove strong enough a catalyst for further tightening in invoice spreads.”
• “While we still regard term spreads as too wide relative to the short-dated relative cost of financing, we take 6bp profit on our RX/€STR tightener initiated on 30 November and turn tactically neutral - looking to re-deploy our strategic bias at better entry levels.”