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Commerzbank: Stay Short ASWs

BUNDS

Commerzbank note that “swap spreads are taking out major levels as fading remuneration risks trigger a tentative realignment with cheap spot repos, where specials and CTDs are cheapening towards GC.”

  • “However, our decomposition of Schatz spreads vs. €STR shows that forward specialness is still elevated at over 40bp. For Euribor-spreads, fading implied vols on fading ECB-risks are crucial, taking optionality out of widening positions.”
  • “With collateral supply and demand set to take over from here and a sizable issuance cut in the upcoming Q4 Bund calendar unlikely to reverse the imbalance, we affirm our ASW-tightener.”
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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