The flight-to-quality intensified amid fears about a gap in Greece’s medium term fiscal austerity package and the outcome of vote on the package by the Greek parliament.
The end of the EU summit may still be good for a pre-weekend tranquilizer. We stay neutral in the Bund future on tactical grounds today. After being stopped out of our ‘Tier 2’ vs. core spread tightening position in the belly of the curve due to yesterday’s major spread widening move, we are back to neutral.
After yesterday’s overall weaker-than-expected PMIs (only the German services PMI improved vs. May), today’s German ifo will be in focus in the EMU data arena.
In derivatives space we recommend to position for a corrective widening of the € 2-5-10 IRS fly by paying the belly of the curve.
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