Goldman: The Case for Bonos

Goldman Sachs write “since 4Q23, global inflation relief has been a powerful tailwind for risk assets in general and credit in particular. Now that this broad indiscriminate phase of the repricing is behind us, we think it makes sense to look at opportunities within market segments.”

• “We argue that Bonos are a particularly attractive asset in that context. They should benefit from the more favourable policy rate backdrop, but also from much improved macro fundamentals. With Spain increasingly 'middle-of-the-pack', we look for further spread convergence against semi-core.”
• “We believe being long Spain against shorts in the semi-core at the 10y point of the curve is the best way to position for that theme. It is likely to work well as semi-core and EU issuance flows accumulate through 2024, and also offers exposure to a more favourable pricing of Spanish credit risk. The recent steepening of the Spanish curve also offers a good entry point.”