BARKIN: FED SHOULD ACT DELIBERATELY, KEEP CLOSE EYE ON ECONOMY

MNI BRIEF: China Equip't Renewal Policy Includes Foreign Firms

MNI China Daily Summary: Wednesday, July 17

MNI China Press Digest July 17:  Investment, LPR, H2 Priority

MNI: PBOC Net Injects CNY268 Bln Via OMO Wed; Rates Unchanged

CHINA PBOC CONDUCTS CNY270 BILLION VIA 7-DAY REVERSE REPOS WED

MNI: US JUN INDUSTRIAL PROD +0.6%; CAP UTIL 78.8%

Foreigners Buy CAD20.9B of Canada Securities In May Led By Debt

MNI: US JUN HOUSING STARTS 1.353M; PERMITS 1.446M

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

Mizuho Note Short-Term Hawkish Risks On ECB, But Like Belly Of 2s5s10s German Fly Further Out

EGBS
HomepageBond Market NewsEuropean Central Bank (ECB) Market NewsBulletMarketsFixed Income Bullets

Mizuho note that “10-Year German bonds have been underperforming U.S. Tsys. If a hawkish ECB cut materialises today, we think investors will sell the strength in EUR duration given the improvement in the latest EUR macro numbers.”

  • They go on to caution that “the risk scenario is for Lagarde to not sound as hawkish as the market is expecting, driving a further rally in EUR rates.”
  • They go on to highlight “10-Year Bund yields are currently testing a key technical level (2.45-2.50%). A less-hawkish-than-expected ECB is, in our view, one of the key necessary conditions to see Bund yields close the week below that technical threshold.”
  • Over a slightly longer term perspective they think “the YTD selloff in rates is a bit overdone.” They flag a pullback in commodity prices and the bid in U.S. Tsys as supportive factors for EGBs, while indicating “good risk-reward in buying 5s on the 2s5s10s fly.”
  • This comes after 5-Year Bunds recently closed at the cheapest level in over a year on the 2s5s10s fly.

Fig. 1: German 2s5s10s Butterfly (bp)

Keep reading...Show less
198 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

Mizuho note that “10-Year German bonds have been underperforming U.S. Tsys. If a hawkish ECB cut materialises today, we think investors will sell the strength in EUR duration given the improvement in the latest EUR macro numbers.”

  • They go on to caution that “the risk scenario is for Lagarde to not sound as hawkish as the market is expecting, driving a further rally in EUR rates.”
  • They go on to highlight “10-Year Bund yields are currently testing a key technical level (2.45-2.50%). A less-hawkish-than-expected ECB is, in our view, one of the key necessary conditions to see Bund yields close the week below that technical threshold.”
  • Over a slightly longer term perspective they think “the YTD selloff in rates is a bit overdone.” They flag a pullback in commodity prices and the bid in U.S. Tsys as supportive factors for EGBs, while indicating “good risk-reward in buying 5s on the 2s5s10s fly.”
  • This comes after 5-Year Bunds recently closed at the cheapest level in over a year on the 2s5s10s fly.

Fig. 1: German 2s5s10s Butterfly (bp)

Keep reading...Show less