Helped by intensifying fears that the IMF may not release the next aid tranche for Greece and disappointing US macro data, 10y Bunds have reached our envisaged near-term target at 3% in yield.
While the air in the RXM1 may be getting thin from here on, next week’s BTP and SPGB auctions may well warrant further room-making with dealers in the upcoming session(s), given the prevailing high (spread) volatility.
With global growth concerns gaining traction and elevated headline risk surrounding the situation in Greece into/over the weekend (with bank holiday on Monday in the UK), we strongly advise against shorts in liquid core eurogovies.
Regarding supply announcements, we expect AFT to announce today a new 10y OAT with Oct21-maturity for next week’s regular OAT auction.
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Interest Rate Strategy