J.P.Morgan Weigh In On EGB & Gilt Futures Rolls

J.P.Morgan write “with the exception of Bobl and Schatz, all other Eurex rolls have joint CTDs and therefore funding rates are expected to play a significant part in the roll dynamics. We expect German bond specific specialness to increase given current historical cheap levels and Finanzagentur’s decision on remuneration of govie deposits.”

• “We have a bullish bias on Buxl roll on expected increase in repo specialness and small decline in overall funding rates.”
• “Bund roll has an upward bias on increase in decline in funding rates.”
• “We are bearish on duration-neutral Bobl calendar spread on expected flattening of the 2s/5s bond yield curve.”
• “Modest bearish bias on Schatz duration-neutral calendar spread on expected relative cheapening of front CTD versus back.”
• “Gilt roll is biased modestly lower on expected back basis convergence.”
• “10Y OAT roll is expected to remain stable.”
• “We have a downward bias on duration-neutral 10Y BTP roll on declining net optionality.”
• “3Y BTP spread has an upward bias on widening of BTP/Bund spread.”