Greek PM confidence vote tonight: while we stand ready to re-install tactical ‘Tier 2’ tightening exposure and Bund outright shorts in case of a convincing vote in favour of Papandreou, the risk of an adverse outcome is not negligible.
In light of the potentially drastic consequences in case of the latter, we expect Bunds to remain range-bound during today’s session and re-iterate our call to keep hands off spread exposure going into the vote.
New 5y DSL 2.5% Jan17: DSTA’s initial spread guidance is 31-35bp yield pick-up over the DBR Jan17 – based on Monday’s COB levels, we consider 32.5bp as fair.
Dutch belly undervalued in the AAA space: exploit this RV (virtually) independent of general widening/tightening moves by overweighting DSLs at the expense of equally-weighted combinations of Bunds & OATs with similar maturity.
Commerzbank Corporates & Markets
Interest Rate Strategy