###POV. The front end of European curves.......>

EGBS: ###POV. The front end of European curves look flat once again and the

potential for an autumn taper announcement threaten to disrupt. 

- Yesterday, we noted a Euribor steepener trade in the Z7-H8 done at 4.5 cents

and that was close to the bottom end of the range that has stretched as high as

11 cents. This started us thinking, what other parts of the curve look

exceptionally flat.

- The German curve is a good place to start. For example, BKO 0% Dec-18 vs BKO

0% Mar-19 is just 0.4bp, which needs a curve inversion to produce any large

steepener losses. This comes courtesy of a negatively sloped asset/eonia swap

spread curve swaps at this tenor -- the asset swap spread curve has flattened.

- The swap curve does not look exceptionally flat around here. At present, the

18m to 2Y swap spread is 5bp and above the 3bp average seen over the past year.

- The eonia curve has half the slope of euribor swap curve: the 1-2Y eonia

spread is 5bp and also unexceptional in its recent flatness. 

- In short, good maturity/security selection can reveal impressive flatness.