Commerzbank Maintain Swap Spread Tightening Bias

Commerzbank write “once more, swap spreads are struggling to find support after key levels have been taken out.”

• “What’s new is that the tightening pressure is not only driven by the Schatz but also by the long end, as duration aversion is taking its toll on spreads.”
• “The massive compression in our forward specialness measure also reflects the overriding decline in risk premia as summarised by sliding BTP-Bund spreads and implied € vols.”
• “So as argued before, few arguments for an imminent turnaround, which is also implied by the heavy focus on the €STR+ levels for the Schatz in our conversations with clients.”
• “We therefore stick with our swap spread shorts.”