Sell the 10-year Dutch/German yield spread, says Rabobank, with the spread narrowing some 13bps since the start of the month, 3bps of which is on the back of Wednesday's German court ruling on the ESM. Adds, "With the Dutch and Finnish 10-year spreads over Germany now broadly level, we would judge the Dutch 10-year to be looking somewhat rich on a cross-market basis, not least owing to a possible protracted round of coalition negotiations in the wake of today's parliamentary elections." Notes that this trade "is more a tactical play on political risk premia rather than a longer-term bearish play." Rabobank suggests entering at a spread of 31bps with a target of 41bps and a stop-loss at 26bps.
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