UBS: Position For Flatter Saron H4/Z4 Spread, Colour On Saron Swaps

UBS note that they “like Saron March vs December 24 flatteners as the front-loading of SNB cuts in 2024 could be pushed out or more cuts could be priced.”

• They “expect the first SNB cut in June from the SNB, followed by a cut in September and December, to 1% by the end of the 2024.”
• “The Saron Mar vs Dec 24 curve has steepened by nearly 10bps since mid-December.”
• “There is anecdotal evidence of a pick-up in CHF corporate issuance activity since the start of the year. Foreign investors typically issue CHF-denominated liabilities and use CHF swap and cross-currency swap markets to convert them in local currencies. Flows are typically concentrated in the 5y-7y sector. We expect CHF issuance flows to accelerate further, which could push the Saron 2s5s10s fly lower in the coming weeks.”