巴黎银行-欧洲-宏观策略-欧元区聚焦：去拿！-20190123-10页_1mb

FOCUS EUROZONE Summary

Core Content

This report provides an analysis of the Eurozone Government Bonds (EGBs) credit curve and offers trade ideas for investors. It discusses the relative valuations of core and non-core EGBs, highlights key movements in the bond market, and outlines the rating outlook for France, Italy, and Spain.

Key Market Observations

• Credit Curve Flattening: The EGB credit curve has flattened since late November, with the 10y BBB rates ASW showing reduced sensitivity to rating changes (from 50bp to 35bp).
• Outperformance of Non-Core EGBs: Non-core EGBs, particularly the 5y BTP ASW, have outperformed, making 3s5s BTP flatteners attractive.
• Valuation Gaps:
  • The 5y BTP ASW is now cheaper than the 3y bucket, reversing the previous trend.
  • The 30y Irish ASW is the most expensive among all EGBs, while the 30y Olos and ATS are notably cheaper than the spline curve.
  • The 10y core/semi-core EGBs show a significant gap against the spline curve, with OATs being the third cheapest.
• Rating Outlook:
  • No rating changes are expected for core and semi-core countries in Q1-2019.
  • The 10y BTP ASW reflects a potential cumulative 4.5 notches downgrade, though this is considered pessimistic.
  • The BTP curve has steepened due to concerns over Italian debt sustainability, but this trend has since stopped.

Trade Ideas

Core EGBs

• Long 10y OAT vs DSL: Book profits at +7bp. Current spread is at 20.5bp, targeting low 10s.
• Short OAT Invoice Spread: Maintained at 22bp, targeting low 10s.

Peripherals

BTPs

• Sell BTP Nov 21 into Sep 24: Spread of 117bp, target at 100bp, carry of -0.2bp/month. Stop at 127bp.
• Long BTP 5y vs 3y (aggressive): Potential for further price appreciation.

Bonos

• Hold BTP 7s15s Flatteners: Spread of 47bp, target at 35bp.

Irish

• Irish 30y ASW is very expensive, while the 5y bucket is cheaper. Investors with long 30y Irish positions may consider switching.

Rating Outlook for France, Italy, and Spain

France

• Rating: AA (S&P), Aa2 (Moody's), AA (Fitch), AAA (DBRS).
• Outlook: Stable for all agencies.
• Next Review: 5th April (S&P), 3rd May (Moody's), 14th June (Fitch).
• Factors: Continued budget deficit reduction, but challenges in fiscal convergence.

Italy

• Rating: BBB (S&P), Baa3 (Moody's), BBB (Fitch), BBB-H (DBRS).
• Outlook: Negative (S&P and Fitch), Stable (Moody's).
• Next Review: 26th April (S&P), 15th March (Moody's), 11th January (DBRS).
• Factors: Fiscal targets revised downward, progress in reducing NPLs, but structural issues remain.

Spain

• Rating: A- (S&P), Baa1 (Moody's), A- (Fitch), A (DBRS).
• Outlook: Positive (S&P), Stable (others).
• Next Review: 22nd March (S&P and DBRS), 24th May (Moody's), 11th January (Fitch).
• Factors: Strong economic fundamentals, but political uncertainty and high unemployment remain concerns.

Summary Table (Key Gaps and Z-Scores)

Important Notes

• The report is non-independent research and may be subject to conflicts of interest.
• It is intended for Professional Clients and Eligible Counterparties under MiFID II.
• The information is for informational purposes only and should not be relied upon as authoritative.
• All prices and spreads are indicative and may vary based on market conditions and models.
• The report does not constitute investment advice or a prospectus. Investors are advised to seek independent guidance.