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OAT: Commerzbank Turn More Cautious On Spreads

OAT
CEEMEAEurozoneFranceBulletMarketsFixed Income Bullets

Commerzbank note that “after touching 82bp in early Monday trade, the 10-Year OAT/Bund spread stabilised near the 80bp mark, probably helped by the significant backflows seen in recent days.”

  • They go on to remind that “in early October we suggested scaling into tactical OAT longs near 80bp, due to, among other reasons, the muted near-term rating risks.”
  • However, they are now “getting more cautious and suggest using relief phases to reduce French risk e.g. if there is an S&P rating affirmation at the end of the week. Besides the recent political headlines underscoring the budget/political uncertainty, the macro outlook is also deteriorating quickly as evidenced by the latest PMIs.”
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Commerzbank note that “after touching 82bp in early Monday trade, the 10-Year OAT/Bund spread stabilised near the 80bp mark, probably helped by the significant backflows seen in recent days.”

  • They go on to remind that “in early October we suggested scaling into tactical OAT longs near 80bp, due to, among other reasons, the muted near-term rating risks.”
  • However, they are now “getting more cautious and suggest using relief phases to reduce French risk e.g. if there is an S&P rating affirmation at the end of the week. Besides the recent political headlines underscoring the budget/political uncertainty, the macro outlook is also deteriorating quickly as evidenced by the latest PMIs.”