Global risk off mood has taken hold again with US macro fears joining the Greek bailout II drama. Concerns about the handling of private sector involvement and the timing have intensified. Political instability in Greece adds to the unease.
Markets may be in for a correction after yesterday’s vicious moves, but we recommend sticking to the sidelines in terms of outright movement in Bunds and re-iterate our call that the time for intra-EMU spread tightening has not come yet.
For now, we recommend looking for RV opportunities independent of general widening/tightening moves, as outlined in our Rates Radar sent out yesterday and below regarding today’s French and Spanish auctions.
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Interest Rate Strategy