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21 May 2014
Eye’s on Euro area and effects of QE - BAML
FXStreet (Guatemala) - Mark Capleton, Rates Strategist at Bank of America Merrill Lynch explained the outcome in respect of QE on rates in the EZ.
Key Quotes:
"We see QE - if it happens - as something that would reduce forward real yields in the Euro area materially, by simultaneously lowering nominal yields and lifting inflationary expectations. But with this not being our central scenario, we need other reasons to receive them and we have them: attractive roll-down and the coming cash flow and index events in the summer."
"However, since we introduced the theme in a QE piece a month ago, the 5y5y OATei real yield has rallied 19bp, so we want a catch-up trade. We believe being long OATei 2024 on an ASW of 41.5bp is the one."
Key Quotes:
"We see QE - if it happens - as something that would reduce forward real yields in the Euro area materially, by simultaneously lowering nominal yields and lifting inflationary expectations. But with this not being our central scenario, we need other reasons to receive them and we have them: attractive roll-down and the coming cash flow and index events in the summer."
"However, since we introduced the theme in a QE piece a month ago, the 5y5y OATei real yield has rallied 19bp, so we want a catch-up trade. We believe being long OATei 2024 on an ASW of 41.5bp is the one."