Primary Market
We shift to March OFZ futures as December’s will expire soon. We note that the OFZ2 basket has been changed and now contains the 25076, 25068 and 26202 issues. Moreover, the RTS has launched OFZ6, which is composed of long-term OFZs. The next OFZ auction is set for 7 Dec.
Observations and Recommendations
We close our spread deal (opened in September) with a loss of 2.1%. The curve shifted downwards over the mid-term, while in the short term it made no moves, which generated a loss in our long OFZ2/short OFZ4 position. Despite negative rating actions by S&P, we now believe the EU’s leaders are fully determined to resolve the eurozone’s problems, which sets a positive tone for the overall market. Under these conditions we see a number of bonds that are fundamentally interesting in the mid-term. This is supported by our model curve which shows a price potential of up to 50 bpts in 26203 and 26206. OFZ4 futures are also worth buying, in our view.
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