BofAML: cuenta atrás hacia un escenario complejo en los bonos

Redacción - Martes, 31 de Mayo

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The European Credit Strategist: Countdown to complexity
•   CSPP buying could begin on Monday June 6th (the same week as Euro 2016 starts)
•   We still think that French risk assets have the most upside once CSPP gets going
•   Peripheral non-financials now look the least attractive to their respective sovereigns, looking back over the last 12m

The ECB and the world…

If the ECB use next Thursday's meeting to signal the start of the Corporate Sector Purchase Programme, then we sense that it will beMonday June 6^th that buying begins in earnest. But next month will be important for the ECB in other ways, as the bank's balance sheet willreach a post-Lehman record. And in early 2017, the ECB's balance sheet will likely surpass that of the Fed's ($4.5tr). Still, nothing comes close to the SNB for now, whose balance sheet is almost equal to the GDP of Switzerland.

"Travel vs. arrive"?

We sense credit investors' tone towards CSPP has markedly soured over the last few weeks,with manyciting the painful experience of last year's "Bundshock". We certainly see scope for June CSPP buying to be underwhelming, and for credit spreads to therefore give back a bit in July. But without rising inflation expectations in Europe, we think there can be little notion of QE ending early. If so, a credit "tantrum"seems unlikely to us, and CSPP will be for thelong-haul.

Vive la France!

CSPP looks very geared to buying French credits. But we wonder whether the ECB will need to over-purchase French large-cap names in order to keep up with their "benchmark". We see this possibility as very bullish for French risk-assets in general. But the French complex hasn't noticeably outperformed in either the credit or equity space since the March ECB meeting. Hence, we think French upside is a theme to consider.

The overvalued periphery

Conversely, the peripheral credit rally has been more visiblelately. Yet this has come at a time when Spanish and Italian sovereign risk has been soured by election worries and bank concerns. Peripheral non-financials now look the least attractive to their respective sovereigns when looking back over the last 12m.Thus,peripheral credits appear the top candidates for underperforming should CSPP begin with teething problems.

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