Commerzbank Continue To Look For Narrower ASWs

Commerzbank write “in repo, Bund specials are resuming the cheapening trend following the completion of the futures roll.”

• “Our specialness metric (10 most expensive ISINs vs. €STR) is hitting new lows below €STR-10bp. Such single-digit repo spreads were last observable in 2020, i.e. when markets were pricing "bond abundance" in the face of the Covid-driven issuance wave.”
• “Swap spreads are also under pressure again and invoice spreads are back at the lows just above 20bp for Schatz vs. €STR and 50bp for Bund vs. 6m Euribor which were recorded a few weeks ago.”
• “Once more, cheapening collateral premiums imply ongoing tightening pressure on ASW-spreads as such a disconnect between spot and forward specialness will not prove sustainable.”