The successful confidence vote for the Greek PM Papandreou last night should reduce systemic risks near-term and may well bring along further positive newsflow in coming days. We install tactical ‘tier 2’ spread tighteners via 5y Spain and Italy as well as tactical shorts in September Bund contracts.
Nevertheless, crucial events for Greece still lie ahead. Volatility and event risk will likely remain at elevated levels even after yesterday’s vote. For investors looking for RV independent of general widening/tightening moves, we recommend currently several switches on the German curve (see our Rates Radar for details). Bund Jul21 tap today: the bond is a buy vs. the Bund Jan20.
FOMC meeting/press conference tonight: While Bernanke should be keen on explaining the recent macro weakness with one-off factors, increasing growth concerns should keep Treasuries underpinned, though, despite QE2 running out.
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http://www.easyforexnews.net/wp-content/uploads/2011/06/ES_0622e.pdf
Commerzbank Corporates & Markets
Interest Rate Strategy