VIEW: Late Friday saw Goldman Sachs note.......>

EGBS: VIEW: Late Friday saw Goldman Sachs note that "sovereign spreads have been

range-bound since the June ECB meeting. We expect supply will continue at a high

pace throughout the summer, only just balanced by ECB purchases, and so further

spread compression is likely to be contingent on an improving macro backdrop.

One way to visualize this is to look at volatility-adjusted carry in EMU bonds.

Using six-month look-back volatility, we see that despite a marked increase in

yields and carry from mid-February, on a volatility-adjusted basis carry is less

attractive than in the pre-COVID period. With ECB policy unlikely to change in

coming months, ongoing reduction in volatility will then depend on improving

growth and risk sentiment. We think cyclical risks here are more balanced and so

would prefer intra-periphery/semi-core spread compression expressions, such as

long Spain vs short France, or long Italy vs short Portugal, rather than vs

Germany."