Sell SPGB 0% 01/27 vs. buy SPGB 0% 05/24 and SPGB 0.70% 04/32: current level 14.8bp; target 0bp (stop loss 22bp)
The fly is strongly correlated with movements in real rates, and the downward movement in these rates triggered by the Russia-Ukraine conflict has led to the fly visiting the higher bound of the range
The same initial movement was seen in the DBR and BTPs curve – with the 5Y becoming expensive with the downward movement in real rates. However, both these curves have reverted to previous levels while SPGB still has to do so. As such, we believe the fly in SPGB has room for improvement