/SWAPS: Commerzbank: ASW Bifurcation

Commerzbank note that they “had argued before that "this tightening is different" and the accelerating bifurcation since the futures roll is adding weight to our arguments.”

• “Schatz-spreads have bounced back notably since the roll, suggesting that quite a few shorts have taken profits after spreads had hit the tightest level since 2016 and repos have stabilised.”
• “The relentless cheapening of (ultra-)long spreads continues: 30y Bund spreads are currently trading at the cheapest levels in more than a decade against the curve adjusted for the level of short-end spreads.”
• “We doubt that a quick recovery of (ultra-)long spreads is in store. For one, a major outright widening appears unlikely as 'collateral abundance' continues to prevail.”
• “In addition, further concessions still seem in store to align virtually 100% free floating ultra-long flows with heavy supply - as well as the 'global' steepening of credit structures from EGBs to USTs. We stay short Bund-spreads across the entire ASW-structure.”