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Natixis: 5Y-10Y BTP Steepener: Hedging Against An Early QT On PEPP

BTP

Natixis write “Italy has been back in the spotlight since early September with a 10Y BTP-Bund spread widening to 180bps on September 18th, the highest level since June 2023.”

  • “Q4-2023 is likely to be more challenging for sovereign spreads but we don’t expect a significant repricing due to several factors that support BTPs.”
  • “Ahead of a possible ECB QT on PEPP, we think that steepener in BTPs makes more sense than playing the widening in spreads vs. Bund.”
  • “We consider the 5Y-10Y BTP slope too flat, identifying significant scope for further steepening.”
  • “We recommend entering a 5Y-10Y BTP steepener (entry: 46 bp, target: 65 bp; stop-loss: 35 bp; horizon: 6 months).”
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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