Commerzbank Weigh In On ASW, Resumed Strategic Shorts

Commerzbank note that “swap spreads continue to grind tighter and Schatz spreads vs. €STR have even taken out the key 40bp mark. Although the bulk of the latest leg tighter mostly reflects the usual collapse of the futures roll, risks of self-reinforcing cash/ASW-richening have fallen significantly when adding persistently cheap levels of GC, specials and BuBills to the equation.”

• “Hence, markets are turning the page on the Bundesbank faster than we had anticipated but add weight to our core conviction that the Bundesbank's remuneration will become 'just' another reference rate rather than the pricing benchmark for German paper and that the supply of and demand for collateral constitute the key pricing factors.”
• “As these continue to argue for tighter spreads amid still elevated forward specialness and hence attractive risk-adjusted carry, we have resumed our strategic ASW-shorts.”