GLOBAL INVESTMENT STRATEGY, EXECUTION AND RISK MANAGEMENT FOR INSTITUTIONAL INVESTORS

QUICK RATES ROUNDUP

> Light volumes in Asia with a bearish bias as stocks trade well and the market braces for another huge US refunding announcement this pm. Estimates for the 3s, 10s and 30s auctions next week center around $58bn 3yrs, $41bn new 10yrs and $27bn new 30yrs. As noted in the article in our chat, the market's bracing for another surge in issuance post the next stimulus package which, when combined with reflation expectations, could renew bear steepening pressures on the UST curve and beyond.

 

UST 5-30s curve makes another new high…

 

 

SUPER MARIO?!

> Regardless what your view is on the state of the ECB and Draghi's tenure as chairman, he brings instant name recognition globally and is considered the safest of hands in what's broadly considered a political circus.

> Hence, we're expecting BTPS to trade well this am on the back of reports he is being touted as the next PM of Italy. Whether this bid extends beyond BTPS is the bigger question, especially with a PGB deal and a big chunk of OATs and Bonos tomorrow am. T DBR 2/31 - BTPS 4/31 sprd back near its tightest levels at 106bps.

> GILTS are opening lower in line with the rest of the EUR and US, G H1 back to the late Nov lows at 133.50 area. (Chart below) The £2.75bn 10am tap of the 0Q31s comes with the issue at its cheapest on the curve (our 0E26-0Q31-1Q41 fly is back to -4.1bps, about .4 cheaper this am) but there's been little cheapening vs SONIA or on roll vs 4T30s. Lastly, our 0E26-0Q31 flattener is about .7bps under water from where we recommended it, reflecting the overall pullback.

 

G H1

 

0E26-0Q31-1Q41 Fly

> Macro vs Micro: The influences here are MACRO, not micro. In other words, the outlook for the UK remains the same in our view - relative economic stagnation for the next few months given lockdown and Brexit pressures with a medium term bullish outlook due to the pace of vaccine delivery and pent-up activity. Funding cash flows are neutral at worst into the end of the qtr and the MPC is broadly expected to be dovish tomorrow. The front-end of the curve has been very well supported due to the accumulation of cash, the shift of funding to the long-end and APF demand that has dwarfed supply. At current levels vs swaps and signs that the surge in home buying is tapering off, front-end demand is likely to wane from it's brisk pace.

 

More to come…

 

Mark

 

 

 

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

E:             Mark.Funsch@AstorRidge.com

W:            www.AstorRidge.com

UK:          14-16 Dowgate Hill, London UK EC4R 2SU

US:          245 Park Ave, 39^th Floor, NY, NY, 10167

 

This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

                                While it's hard to judge the impact of a Draghi govt in Italy – I wanted to revisit bearish BTP structures in Italy really quickly before the opening…

               

                               

                Trade 1 -
                Curve Flatteners

 

– looking at the absence of 'risk' in Italian forwards  a weaker BTP curve will be led by 5s and 10s – so 10s30s flattener is ok but crowded and over valued unless we get a very dramatic > 20bp sell off

                Therefore I like…

 

                I like 30s50s flattener

                (YIELD[BTPS 2.8 67 Corp] - 1 * YIELD[BTPS 2.45 50 Corp]) * 100

 

                And on a regression, the residual of that trade looks ok too

(YIELD[BTPS 2.8 67 Corp] - 0.904 * YIELD[BTPS 2.45 50 Corp] - 0.41) * 100

 

               

 

Trade 2

Sell belly buy wings

-5y +2y +10y

CMB Bloomberg bonds displayed

200 * (RV0005P 5Y BLC Curncy - 0.5 * RV0005P 2Y BLC Curncy - 0.5 * RV0005P 10Y BLC Curncy)

Again great location, front forwards have removed so much Italian risk ove the last 9 months that it's easy to see how uncertainty of the long term political scenario couldn't weaken 5yrs

 

 

                                Trades 3 & 4
                                Credit Yield Spreads – sell weaker, vulnerable credits for almost no give up into better, small names – although they have been bought by PEPP – a falling tide avails all these names as plain rich

 

                                While Italy can be seen to trade 'cheap' to its neighbours in terms of spread to Germany vs Credit Rating – any weakness could have a knock on impact onto weaker names

               

                                Trade 3

Ireland into France – 9yrs

                                100 * (YIELD[FRTR 2.5 05/25/30 Corp] - YIELD[IRISH 0.2 10/18/30 Corp])

                             

 

                                Trade 4

                                Portugal into Spain – 9 yrs

                                100 * (YIELD[SPGB 1.95 07/30/30 Corp] - YIELD[PGB 3.875 02/15/30 Corp])

                               

 

                               

 

                               

Let us know

 

Best

 

James & will

 

 

James Rice

 

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 12 East 49^th Street, Suite 10-125, NY, NY, 10017

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

                                While it's hard to judge the impact of a Draghi govt in Italy – I wanted to revisit bearish BTP structures in Italy really quickly before the opening…

               

                               

                Trade 1 -
                Curve Flatteners

 

– looking at the absence of 'risk' in Italian forwards  a weaker BTP curve will be led by 5s and 10s – so 10s30s flattener is ok but crowded and over valued unless we get a very dramatic > 20bp sell off

                Therefore I like…

 

                I like 30s50s flattener

                (YIELD[BTPS 2.8 67 Corp] - 1 * YIELD[BTPS 2.45 50 Corp]) * 100

 

                And on regression the residual the same trade looks ok here too

(YIELD[BTPS 2.8 67 Corp] - 0.904 * YIELD[BTPS 2.45 50 Corp] - 0.41) * 100

 

               

 

Trade 2

Sell belly buy wings

-5y +2y +10y

CMB Bloomberg bonds displayed

200 * (RV0005P 5Y BLC Curncy - 0.5 * RV0005P 2Y BLC Curncy - 0.5 * RV0005P 10Y BLC Curncy)

Again great location, front forwards have removed so much Italian risk ove the last 9 months that it's easy to see how uncertainty of the long term political scenario could weaken 5yrs

 

 

                                Trades 3 & 4
                                Credit Yield Spreads – sell weaker, vulnerable credits for almost no give up into better, small names – although they have been bought by PEPP – a falling tide avails all these names as plain rich

 

                                While Italy can be seen to trade 'cheap' to its neighbours in terms of z-spread to Germany vs Credit Score – any weakness could have a knock on impact onto weaker names

               

                                Trade 3

Ireland into France – 9yrs

                                100 * (YIELD[FRTR 2.5 05/25/30 Corp] - YIELD[IRISH 0.2 10/18/30 Corp])

                             

 

                                Trade 4

                                Portugal into Spain – 9 yrs

                                100 * (YIELD[SPGB 1.95 07/30/30 Corp] - YIELD[PGB 3.875 02/15/30 Corp])

                               

 

                               

 

                               

Let me know

 

Best

 

James & will

 

 

James Rice

 

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 12 East 49^th Street, Suite 10-125, NY, NY, 10017

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

BOND FUTURES AND VOLUMES : BONDS CONTINUE TO GRIND LOWER AND CLOSE TO BREACHING RECENT LOWS. ONCE AGAIN THE LATEST MOVE HAS BEEN ASSISTED BY “HUGE” VOLUME!

THE JUMP IN VOLUME EVERYTIME BONDS HEAD LOWER MUST BE REASSURANCE FOR ALL SHORTS!

THE DAILY RSI’S ARE VERY MUTED.

ONE ADDITIONAL AND MAJOR PROBLEM IS WE ARE ABOVE THE SIZEABLE VOLUME FROM EARLY JANUARY SO NEED TO FAIL THROUGH THAT VOLUME BARRIER INTO MONTH END.

THE MONTHLY CHARTS STILL FORECAST MUCH HIGHER YIELDS FOR THE ENTIRE YEAR!

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
• US:          245 Park Ave, 39^th Floor, NY, NY, 10167
• Office:   +44 (0) 203 143 4174
• Mobile:  +44 (0) 7980708683
• Email:     chris.williams@astorridge.com
• Web:       www.AstorRidge.com
•  
• •             I provide our research notification below for your convenience:
• •            
• •             Research Unbundling:
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• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge. We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
• •            
• •            
• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
• •            
• •            
• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
• •            
• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
• •            
• •             Many thanks,
• •            
• •             Chris

 

 

Trades & Fades Part II will & James at Astor Ridge

Supply in Belgium 50y and Long France – Leaves French 30y cheap

 

French 30y vs Buxl and Btps 30y – now as cheap as crisis levels and we expect this to relieve itself by next week

 

Trade

+30y France / -UBH1 / Italian 30y

 

Carry Estimates

UBA: -0.7bp /3mo

Frtr: 30y +1bp /3mo

Btps: -2.3bp /3mo
Subject to received repo rates and contract impieds

Weighted carry package: -0.3bp /3mo

Credit curve  - Z-Score vs interpolated Germany 25y-30y…

 

Credit Anomalies vs Orange fitted Curve

            This graph is the difference between z-spread over Germany and the fitted, orange curve

*Smaller Issuers & Germany are not part of the fit

 

               

 

 

Give us a call/ drop us an IB to check your levels, issue selection and hedge ratios, pls

 

            Hope this is of some help & you’d like to see more

 

 

 

                Will & James

 

 

 

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 12 East 49^th Street, Suite 10-125, NY, NY, 10017

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

FX UPDATE : THE USD LAST MONTH LEFT SOME VERY MEMORABLE-RELIABLE LEVELS ACROSS NEARLY ALL CROSSES. CAN WE BREACH THEM OR DO WE HOLD?

THE AUD HAS PAUSED AND MAY WITNESS PROFIT TAKING.

USD MXN HAS HELD ITS 50 PERIOD MOVING AVERAGE-38.2% RET 19.7005 SO LETS SEE IF RE-BREACHED.

HERE ARE A SELECTION OF USD CROSSES THAT MUST SURELY SEE THE USD FADE OVER TIME. SIMILAR TO THE BOND MARKET REJECTION OF ITS MARCH EXTREMES!

I HAVE USED NON-CORE CROSSES AS THEY ACHIEVED SOME MAJOR DISLOCATIONS IN MARCH SIMILAR TO US BONDS. I HAVE MARRIED THE USD WITH BRL,MXN,RUB AND CLP. THEY HIGHLIGHT BOTH USD AND US BONDS ARE HEADING LOWER FOR SOME TIME.

USDTRY HAS A PERFECT FAILURE AT ITS MAJOR 2001 TRENDLINE 8.0084 AND MAKING ITS "OWN" EFFORTS LOWER.

SOME CROSSES ARE AT MULTI YEAR EXTREMES AND REPRESENT A SIZEABLE LONGTERM TRADE OPPORTUNITY.

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
• US:          245 Park Ave, 39^th Floor, NY, NY, 10167
• Office:   +44 (0) 203 143 4174
• Mobile:  +44 (0) 7980708683
• Email:     chris.williams@astorridge.com
• Web:       www.AstorRidge.com
•  
• •             I provide our research notification below for your convenience:
• •            
• •             Research Unbundling:
• •            
• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge. We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
• •            
• •            
• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
• •            
• •            
• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
• •            
• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
• •            
• •             Many thanks,
• •            
• •             Chris

 

 

 

A few things we’re looking at in European RV space below –

Supply and Cashflow Estimates for Europe in the Attachments

 

German 10y top of the anomaly curve, a buy vs 7y and 16y

 

• Next German 10y tap (Dbr 0% Feb31) on Feb 24^th – street continues to see buying interest on the basis suggesting that RM has lifted dealers at current yield levels
• The old Dbr 4% Jan 37 will be seen as rich when the new 15y Mar 36 comes on March 3^rd
• The old Dbr 0.25% Aug28 will look rich when the new Dbr Nov28 comes on April 27^th
• The forwards look compelling on this structure – so it has intrinsic value and a solid ‘story’

 

German Anomaly Values vs Fitted curve (High and Low coupons)

 

German Bond Forwards

 

            Levels:
            Current: -0.8bp
            Add: Flat

            Target: -6.5bp Long Term

 

            Carry: -0.3bp /3mo @-10bp repo spread

 

 

            Italy Too Flat vs Germany 10s15s

            ITALY 10s15s Steepener vs flattener in 25% -RX/+UB

 

            Since last June Italy has out flattened Germany – as the credit curves compress we would expect to see stronger correlation

 

            Trade

Italy 10s20s steepener

Plus a flattening hedge of 25% delta in -RX/+UB

 

            100*((yield[BTPS 4 02/01/37 Govt ]-yield[BTPS 1.65 12/01/30 Govt ])-0.25*(yield[DBR 2.5 08/15/46 Govt ]-yield[DBR 0 02/15/30 Govt ]))

                (History using an old 16year bond – Btps Feb37)

• This box has only been this flat in a much more distressed credit scenario
• The recent low coupon Mar37 20y will continue to be tapped (the prior 15y was tapped 3 times in 9 months)
• With a low coupon in a positive yield curve its carry reflects poor cash-flow value on a fully discounted basis
• The -rx/+ub component provides some protection against changes in the shape of the risk-free rate curve with low Frictional cost: ~ .1bp

 

            France 10s50s vs MMS on recent flat – the issue and discount of the new 72s in France reminds us that the longer tenors (> 31yrs) are not eligible for the PEPP

 

            Taking advantage of the recent sell-off we see that France 10s30s and France 10s50s has out-flattened swaps – if we see any kind of PEPP buying at higher yields it will come at the sub 31y tenor

 

This may leave the 50ys (old and new) as a relative laggard

 

Trade

10s50s steepener France vs MMS

           

Bloomberg History
Long Oat Contracts / Short Old 50y (1.75% 2066) vs MMS

 

 

Levels

Current: -62bp

Enter: -62bp (25% risk)

Add: -56bp, (50% risk, at which point residual is -7.5bp)

Add: -51bp, (25% risk)

                Regress

Levels rationale is based on the regression…..

30y spread ≈ 1.7 * 10y Spread – 0.722

R^2: 0.945
Residual Graph

 

 

           

10 – 30y French supply next Thursday

Buy the Average maturity 20y on credit Fly vs Blend of Germany and Italy

Trade
Long France 2040, Short German 2040 and Short Italy 2040

Weightings: -65% / +100% / -35%

 

This one is pretty clear when you look at how the credits trade vs their rating (as a lens so that you can see the story behind each name)

Here is a graph of each issuer on z-spread over Germany – with credit ‘score’ (an amalgam of rating and outlook) on the x-axis

 

This one is timing for me – Supply on Wednesday – get some on now and add the day before supply – just keep rotating the book around supply with a view to value every time

Avoid selling the v small / scarce issues

 

Spain Bond Roll : Sell double old 10y into new 10y,

Too steep @ +9.6bp

 

 

Here’s anomalies on the Spanish curve – contextually the double old 10y into the new 10y roll is the standout

 

*The HC look rich (and they are) but that is ameliorated a little bit when we adjust for their high coupon in a steep curve by not only looking at yield but by discounting cash-flows vs a proper Spanish discount curve

 

Anomalies fast disappearing in euro RV and love a simple roll trade when everything else starts to look in line

 

Just have this one into Thursday’s first tap of the €10bln Spgb 0.1% Apr 31 – the yield spread forces the forwards to look high which makes me happy to do a roll when sometimes these things can be a land mine. That said I love it even more at a bp or so steeper so am scaling

 

 

Enter here: @ +9.6bp (25%)
Add: +11bp (75%)

Target: +8bp

we’re scaling into this one – it’s good here but because the upside is pretty low, then either I don’t want to miss the trade and have a quarter of my size on…

OR

am joyous at adding to the trade @ +11bp although am not sure we’ll get there given how stand out the trade is on the low coupon curve

So Scale!!!

 

 

All the best

And let us know if this is helpful

James & Will

 

 

 

James Rice

 

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 12 East 49^th Street, Suite 10-125, NY, NY, 10017

 

Office:   +44 (0) 203 - 143 - 4178

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This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

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• Cashflows supportive for Italy, Spain and France. Least supportive for Germany
• Spain has 24bn redemption this weekend
• Italy has 33bn of Coupons and Redemptions at the end of the month
• Germany sees a drip of supply all month, starting with a new Schatz

 

 

• Supply keeps on coming with the second bout of syndications and a slew of long end issuance. Our guesses below:

 

• Belgium 50y expected as early as next week
• Portugal to syndicate a 10y or possibly even longer
• Finland expected to do a 30y
• Spain likely comes in the 15y sector
• France to issue a green bond, likely towards the end of the month given the green bond tap next week
• Possibility as well that we see a 15y out of Austria

 

 

 

• Full ESTIMATED cashflows and supply for the month attached

 

 

Long end Trades on our Radar

 

Buy Long end Belgium vs France on 10/30 Box

 

• We feel the the market has overly discounted the long end of Belgium here given the likely small size of a new 50y. It makes sense to us that once the syndication is announced the 10/30 BGB vs FRTR box will revert back to it's normal range and cycle, which is primarily influenced by French long end supply
• Note that the announcement of a new 50y France was the catalyst for a correction
• CIX ((YIELD[BGB 1.7 06/22/50 Corp] - YIELD[BGB 0.1 06/22/30 Corp]) - (YIELD[FRTR 1.5 05/25/50 Corp] - YIELD[FRTR 0 11/25/30 Corp])) * 100

 

 

Buy 10y Finland vs French and German wings.

• The anticipation of long dated Finland supply appears to be the driver of recent cheapening in Finland.
• We don't feel that this is warranted and indeed PARTICULARLY in the scenario of lower than anticipated PEPP utilisation we ought to see smaller names outperform as their funding needs will not weigh on the market as much as more funding intensive names
• CIX: (YIELD[RFGB 0 09/15/30 Corp] - YIELD[DBR 0 02/15/30 Corp] * 0.6 - YIELD[FRTR 2.5 05/25/30 Corp] * .4) * 100
•  

 

 

Take Profit on 10/30  flatteners in Italy and France vs Bunds

 

• As Fatboy Slim said, "You've come a long way baby"
• It makes sense to us that people who got long in December will lighten up on these positions as more long end supply leaks into the market

 

10/30 France vs Germany Box

 

 

 

10/30 Italy vs Germany Box

 

 

 

 

Plenty more to come and have a great weekend,

 

Will and James

 

 

 

 

 

 

Will Scott

 

O:            +44 (0) 203 - 143 - 4800

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This research was prepared by Will Scott.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

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Am watching Italy 10s30s flatten versus Germany so I looking at the 10s15s steepener in Italy

 

I really like the value in the 10y point - old ten yrs dec30 and I see the new mar37 (15y) as being a potential for a tap (it's just when not if)

 

So trade I like is

{it} +dec30 -mar37

and the curve hedge is

-rx/+ub

I have some sympathy with the curve hedge too - it's steep historically or could use swaps

 

Here's the trade using the older Feb37s as the mar37 is a more recent issue

 

100*((yield[BTPS 4 02/01/37 Govt ]-yield[BTPS 1.65 12/01/30 Govt ])-0.25*(yield[DBR 2.5 08/15/46 Govt ]-yield[DBR 0 02/15/30 Govt ]))

 

 

James & Will

 

James Rice

 

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 12 East 49^th Street, Suite 10-125, NY, NY, 10017

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

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BOND FUTURES AND VOLUMES : BONDS FAILED YESTERDAY AT ALL THE APPROPRIATE LEVELS BACKED BY VERY INCREASED VOLUME.

THE JUMP IN VOLUME EVERYTIME BONDS HEAD LOWER MUST BE REASSURANCE FOR ALL SHORTS!

THE DAILY RSI'S ARE VERY MUTED.

ONE ADDITIONAL AND MAJOR PROBLEM IS WE ARE ABOVE THE SIZEABLE VOLUME FROM EARLY JANUARY SO NEED TO FAIL THROUGH THAT VOLUME BARRIER INTO MONTH END.

THE MONTHLY CHARTS STILL FORECAST MUCH HIGHER YIELDS FOR THE ENTIRE YEAR!

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

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