ENEL

Short Enel as a Trading Call

 

• ENEL has an almost 1 to 1 correlation to the Italian bond price.
• The more we find out about the European version of QE it seems the most efficient/likely way will be through lending channel. ABS purchases will be the way they go.
• The latest peripheral bond yield move has come from a combination of low growth and inflation expectations, and a front running of QE as a result.
• But with no marginal buyer of bonds in a European QE scenario, and the prospect of higher growth and inflation, do peripheral yields actually go up as this starts to be priced in?
• Could be an interesting dynamic for over levered sectors without pricing power like Utils which have been on fire due to spread tightening.
• Short ENEL anywhere above 4 and watch the Italian bond price.