Senate approves nearly $61B of Ukraine foreign aid − here’s why it helps the US to keep funding Ukraine 
The 50th anniversary of Portugal’s Carnation Revolution 
From the coast to the deep sea, changing oxygen levels affect marine life in different ways 
Inflation is slowly falling, while student debt is climbing: 6 graphs that explain today’s CPI 
Ukraine war: Putin’s plan to fire up Zaporizhzhia power plant risks massive nuclear disaster 
Our housing system is broken and the poorest Australians are being hardest hit 
What’s the difference between ADD and ADHD? 
AI-powered ‘deep medicine’ could transform healthcare in the NHS and reconnect staff with their patients 
What is ‘techno-optimism’? 
What kind of diner are you? 6 types of diners who avoid plant-based meat dishes 
UK smoking ban would have many benefits for public health – but only if it’s effectively implemented 
The political risk is beginning to the Euro in earnest, reflected by the Euro’s trade-weighted value reaching the lowest levels since the US Presidential election, and the OAT/Bund spread reaching the widest levels since then as well.
Looking further back, we last had an OAT/Bund spread this wide in November 2012. Bloomberg have now been tracking the implied probability of the main candidates winning from Odds checker for just over a month and Marine le Pen’s odds have risen steadily over that period while Emmanuel Macron and François Fillon’s have varied more.
The net result is that all three are virtually level-pegging now. So much uncertainty with 9 weeks to go until the first round of the election means we will probably see nervousness persist, and undermine the Euro across the board.
With oil prices testing USD 55/bbl (WTI), short EURCAD still looks attractive as a way to express Euro-bearishness.
EURAUD looks awful on charts but that bird has already flown the coup. Very strong demand for this morning’s record AUD 11bn in 10year bonds is the testimony to the appeal of a 3% nominal yield (or of a near 40bp real yield premium to the US) and has dragged AUDUSD up close to 2016/12017 highs again.
Other Euro shorts that appeal include EURSEK and EURNOK (old favorites) and for very short-term tactical trades, the break below the 200-day moving average in EURGBP is interesting.
The British economy advanced 0.7 pct on quarter in the three months to December of 2016, following a 0.6 pct expansion in the previous period and above the preliminary estimate of 0.6 pct, due to upward revisions within the manufacturing industries.
In 2016 we recommended a series of defensive trades into the Brexit and US election votes1 because we felt that political risks were underestimated. Going into the French elections we believe it is hard to say that political risk is still grossly under-priced, but we nevertheless highlight a set of attractive trades.
We reduce but still keep a France underweight in cash, but find better risk-reward in Spain UW, highlight attractive levels on 5Y France CDS and selling high-coupon OATs vs. low-coupon ones.
We recommend Apr17 Bund swap spreads conditional bull wideners via call/receiver spreads. We add long gamma via deep OTM Apr17 Bund calls.
In the cross market, we recommend a position for EUR rates outperforming GBP rates via long in Bund calls vs. 3Mx10Y GBP receivers.
