RBC Eye Structural Long End Plays In Case Of Further Underperformance

RBC note that they would view “tactical underperformance of the long end as an opportunity to position structurally long the sector via the likes of 5s30s and 10s30s ASW boxes as the market continues to price in the DMO skewing the average maturity of its gilt issuance lower, with a lag, and the likelihood of this trend to persist given the elevated nature of gilt issuance that will be a feature for the foreseeable future.”

• “Next week’s 3T53s auction might present itself as an opportunity to enter these positions - especially given that we expect demand to be strong as its likely the last ever tap of the bond - with a new 30y gilt to be launched via syndication in January.”