VIEW: Thursday saw Rabobank enter a short......>

EGBS: VIEW: Thursday saw Rabobank enter a short 10yr Ireland (IRISH 1.1% May

29s) vs. long Bund future (where the CTD is DBR 0% Aug 29s) position at a level

of 56.9bp, with a target of 73.0bp and stop at 45.0bp.

- They "believe that the mkt is currently "priced for perfection" on a number of

fronts. First, with 10y BTP yields a mere 13bp above where they were just prior

to the onset of the Covid crisis, it appears as if investors are viewing the EU

Recovery Fund proposal as unlikely to be watered down. Second, it seems as if

the market is paying no heed to the possibility of the ECB's flexibility being

constrained by Germany's legal challenge.

- The surging inequality that is a direct bi-product of the virus stands to

usher in a return of populistic tensions as virus concerns dissipate. Third,

when we widen our view to take in risky assets more broadly it looks to us as if

optimism as regards a post-virus recovery is riding remarkably high

- We see the current relatively narrow nature of EGB spds as being as

good-as-it-gets. In terms of populistic/geopol tension, the spd is specifically

vulnerable to a return of hard Brexit worry which we see as a high possibility."