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EGBS: /SWAPS: German ASWs Away From November Highs

EGBS
BulletEurozoneFixed Income BulletsMarkets

German ASWs vs. 3-month Euribor are ~1bp tighter this morning, despite the bid in bonds.

  • Some moderation in French political/fiscal risk premium is probably factoring into the ASW narrowing, with spreads back from yesterday’s month-to-date high.
  • Over the longer term, Commerzbank note that “political risks, calming year-end repos and the seasonal drop in issuance should protect swap spreads into year-end, providing attractive entry levels to position for renewed ultra-long spread cheapening outright and vs. Schatz once issuance gets going next year and German fiscal risks take centre stage again.”
  • More broadly, for OATs, they note that “the minimal funding discounts vs. Bunds argue against accelerating/self-reinforcing widening. Nonetheless, we reiterate our call to reduce French risks and stay short OATs/OLOs vs. Iberia and EU as well as 30y OATs vs. swaps.”
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German ASWs vs. 3-month Euribor are ~1bp tighter this morning, despite the bid in bonds.

  • Some moderation in French political/fiscal risk premium is probably factoring into the ASW narrowing, with spreads back from yesterday’s month-to-date high.
  • Over the longer term, Commerzbank note that “political risks, calming year-end repos and the seasonal drop in issuance should protect swap spreads into year-end, providing attractive entry levels to position for renewed ultra-long spread cheapening outright and vs. Schatz once issuance gets going next year and German fiscal risks take centre stage again.”
  • More broadly, for OATs, they note that “the minimal funding discounts vs. Bunds argue against accelerating/self-reinforcing widening. Nonetheless, we reiterate our call to reduce French risks and stay short OATs/OLOs vs. Iberia and EU as well as 30y OATs vs. swaps.”