Bond valued well

LONDON (Reuters) – The 10-year Greek bond auction yesterday offers good value despite the recent outperformance of core sovereign Germany, but there are other nuggets of value to be had in the non-core nation’s debt portfolio, said ING Groep. Greece auctioned 1.68 billion euros of 3.7 percent July 2015 government bonds yesterday, exceeding expectations of a 1.4-billion-euro sale and garnering total bids 4.86 times the amount on offer. «In other parts of the Greek government bond (GGB) curve there were opportunities to move into the 4.6 percent May 2013 bond which looked attractive in switches out of core,» said ING bond analyst Wilson Chin. Chin tipped selling the 3.75 percent July 2013 Bund and switching into the 4.6 percent May 2013 GGB as it offered at least 1.2 basis points more in curve-adjusted terms than surrounding Bund-Greek switches. «Hence, for those looking for switches out of Bunds into Greece in this maturity area, we would suggest this switch… at an indicative pickup of 13.5 basis points.» ING said it also favored other parts of the Greek yield curve. «We favor setting up a box trade, that is, a 15-30-year flattener – selling the 5.9 percent October 2022 GGB and buying the 4.5 percent September 2037 GGB – versus a 15-30-year steepener in Italy – buying the 4.5 percent February 2020 Italian BTP and selling the 5.0 percent August 2034 BTP,» Chin said. He said the trade would first work because in the 15-year area, the 5.9 percent October 2022 GGB was expected to underperform versus the 4.5 percent February 2020 BTP due to the richness of the 2022 GGB. Also, the trade was helped in the 30-year area, where the 4.5 September 2037 GGB was expected to perform well after the announcement that no reopening is scheduled for the remainder of the year.