Two weeks before the decisive June ECB meeting a host of Board members will get a chance to influence market expectations about the next rate hike. Better liquidity prospects and lingering fears about Greece could add to the re-steepening in coming days, offering better entry into flatteners before the ECB pre-announces the next rate hike in July.
An uneventful data calendar is unlikely to provide the market with a new direction. The main focus should thus remain on official comments about the design of Bailout II for Greece.
We still think 10y Bunds are more likely to test 3% before a modest bear-flattening should take over again. In absence of a fundamental trigger we suggest a tactically neutral position for today.
Commerzbank Corporates & Markets
Interest Rate Strategy