November 27, 2024 08:09 GMT
EGBS: SPGB/OAT/PGB 10-Year Fly Moves Towards -50bp
EGBS
We have been monitoring the SPGB/OAT/PGB 10-Year fly for some and the structure sits at the lowest level seen since ’06, nearing -50bp.
- Last -48bp vs. ’06 lows of -66.3bp
- With French fiscal and political risk remaining present, it is hard to envisage a scenario whereby the trend is reversed, at least in the immediate term.
- A brief recovery was seen in late October/early November, as passive index inclusion flows into PGBs faded and the fiscal impact of the Valencia floods was considered.
- That was before the French risks mentioned above re-emerged, which helped relative fiscal trajectories of the 3 countries reassert themselves in the structure.
- Indeed, Commerzbank warn that “OATs remain vulnerable, above all vs. Iberia.”
Fig. 1: SPGB/OAT/PGB 10-Year Butterfly (%)
Source: MNI - Market News/Bloomberg
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