They predict iBoxx non-financial senior corporate bond spreads at 55 basis points by year-end, the iBoxx financials senior index at 65bp, the high yield non-financial index at 380bp and non-financial hybrids at 220bp.
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Societe Generale’s rates strategists are becoming more confident about re-entering short positions in Italian BTP-German Bund spreads given recent repricing of European Central Bank rates and inflation.
“We are more confident that a gradual increase in spread volatility should play into further risk aversion by non-domestics and carry players.”
The strategists see this as a gradual process, therefore they would enter underweight when the 10-year BTP-Bund yield spread is below 150 basis points. They target an initial move to 170 bps and 190 bps by year end.
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French government bonds seem largely priced for a win by Emmanuel Macron at presidential elections this month, according to Citi’s rates strategists Aman Bansal and Antoine Gaveau.
OATs have outperformed eurozone core and semicore peers, but they face asymmetric risks ahead amid Macron’s tightening poll support versus Marine Le Pen with around 40% of voters still undecided.
“A Macron win is still our base case, but Le Pen is the clear risk for the market given her poll proximity to Macron,” the strategists said. In the case of a Le Pen win, Citi’s strategists expect the 10-year OAT-Bund spread to widen by 20 basis points.
Commodities:
Oil prices dropped…
