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9 Feb 2015
Buy 10y treasuries against bunds – BAML
FXStreet (Barcelona) - The BofA-Merrill Lynch Team, comments on the Treasury-Bund spread, and further suggests to buy 10year treasuries against bunds.
Key Quotes
“[..] we believe a Treasury-Bund spread tightener has an asymmetric risk-reward profile”
“If US data remain strong, the appreciation in the USD could hurt equities and create demand for Treasuries relative to Bunds.”
“If on the other hand, US data turns negative (ie, the US recouples with the rest of the world), Treasury rates would naturally decline relative to other sovereign bond markets.”
“We therefore recommend owning 10year Treasuries against Bunds.”
“The Treasury-Bund spread tightener should also continue to benefit from investor concerns about the Chinese growth outlook.”
“The sharp drop in both Chinese exports and imports in January is likely to be viewed as negative for commodities and increasing the risk of further CNY weakness. This would be especially positive for US rates that have more room to decline than Bunds.”
“The Chinese growth risk is also why we continue to like our top rates trade recommendation for 2015 of paying US 5y rates against receiving 5y Chinese rates.”
Key Quotes
“[..] we believe a Treasury-Bund spread tightener has an asymmetric risk-reward profile”
“If US data remain strong, the appreciation in the USD could hurt equities and create demand for Treasuries relative to Bunds.”
“If on the other hand, US data turns negative (ie, the US recouples with the rest of the world), Treasury rates would naturally decline relative to other sovereign bond markets.”
“We therefore recommend owning 10year Treasuries against Bunds.”
“The Treasury-Bund spread tightener should also continue to benefit from investor concerns about the Chinese growth outlook.”
“The sharp drop in both Chinese exports and imports in January is likely to be viewed as negative for commodities and increasing the risk of further CNY weakness. This would be especially positive for US rates that have more room to decline than Bunds.”
“The Chinese growth risk is also why we continue to like our top rates trade recommendation for 2015 of paying US 5y rates against receiving 5y Chinese rates.”