IFR Comment: Handbrake turn for Spanish bears
It is now time to put risk back on the table when it comes to Spain. We took profits on our 2-year Spain/Germany spread widening trade at 400bp a while back but now feel it’s time to close the 2/10-year curve flattening trade as well as the 5-year Spain/Italy widener. We don’t think the crisis is over but simply that the risk/reward is now starting to look unattractive especially as we start to gain more visibility of a deal to recapitalise Spanish banks.
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