Commerzbank: Unlikely To See Much Better Levels To Resume Strategic ASW Shorts

Commerzbank write “in terms of swap spreads, the tightening momentum continues across the curve, and it looks increasingly unlikely that we will see much better levels to resume strategic shorts. The squeeze in Schatz repo levels down to -1.3% last Friday have given way to more normal levels and German GC remains near its cheapest levels.”

• “Bundesbank President Nagel's comments in yesterday's panel discussion (banks should not have impression July 0% MRR remuneration decision was the last step, "we could do a little bit more here") make no difference - also considering that the direct link from MRR to ASW is muted, unless reserve requirements rise drastically, which Nagel seemed to exclude.”
• “In either case, as we are heading into the Bundestag budget week and with the 0% Bundesbank remuneration on sovereign deposits approaching, Bund scarcity premiums reflected in swap spreads look set to align more with the cheap levels in repo markets.”