/SWAPS: Schatz ASWs Move Closer To Pre-French Election Announcement Levels

Schatz ASW metrics move closer to their pre-French election announcement levels as the flight-to-quality flows that followed the announcement continue to unwind.

• Schatz ASW vs. 3-month Euribor now prints ~3bp above its pre-snap election announcement closing level and ~6bp above ’24 tights.
• Commerzbank note that “this remarkably quick turnaround and a very high correlation to OAT-Bund-spreads suggests that macro/portfolio hedges against contagion/spillovers into broader risk sentiment have been key.”
• They see better value in “long-end tighteners, where 30-Year spreads continue the seminal cheapening. Prospects for fiscal consolidation look bleak, leaving the burden on spreads to balance high issuance with tepid demand. The structural cheapening of EGBs vs. swaps and steepening of credit curves should continue.”