/SWAPS: Commerzbank: ASW De-Anchoring

Commerzbank write “one should not overlook the ongoing Bund cheapening vs. swaps, which continues in the long-end after 30y Bunds took out the 0bp support.”

• “The DBR Aug54 is now trading at double-digit spreads over swaps.”
• “The front end is somewhat better anchored by repo valuations, where the potential for further cheapening is limited near €STR/depo.”
• “For ultralongs, however, the switch from a scarce to abundant supply regime can be more meaningful and valuations are also exposed to global (non-Bund specific) developments.”
• “Despite all the structural differences, the U.S. Treasury curve serves as a reminder that top-rated govy yields can trade at 70bp above swaps.”
• “A Trump confirmation after super-Tuesday may add to the challenging longer-term supply/demand prospects.”
• “Long-end Bunds should be better protected by the debt brake, but also owing to their unique role as top € safe asset and the still limited free float.”