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EGBS: /SWAPS: Mizuho Like 5s10s OATs Steepeners Box Vs. Bunds, Inflation Hedge

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Mizuho note that “given our medium-term view of EUR duration rallying and spread widening in OAT/Bunds, we like 5s10s OAT steepeners - via cash 5s and 10-Year futures.”

  • They think “there is room for another 30bp of steepening in OAT 5s10s. “
  • Then, to mitigate the negative carry and roll, heightened volatility and the risk of near-term flattening of the curve/sell offs they recommend boxing the position vs. German 5s10s and paying 25% of total delta in 2y2y EUR inflation swaps.
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Mizuho note that “given our medium-term view of EUR duration rallying and spread widening in OAT/Bunds, we like 5s10s OAT steepeners - via cash 5s and 10-Year futures.”

  • They think “there is room for another 30bp of steepening in OAT 5s10s. “
  • Then, to mitigate the negative carry and roll, heightened volatility and the risk of near-term flattening of the curve/sell offs they recommend boxing the position vs. German 5s10s and paying 25% of total delta in 2y2y EUR inflation swaps.