Basis: GBP frenzy continues; NOK rocks! 5y EUR/USD busy

Cables wiry
GBP continues to work for issuers and investors and sterling supply is at historical highs. NIB explains why it likes GBP. And NOK is also doing well.

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  • GBP frenzy continues; NOK rocks! 5y EUR/USD busy

  • NIB swaps to EUR; GBP issuance demand, and swap, driven

  • Flow

  • New issues


    GBP frenzy continues; NOK rocks! 5y EUR/USD busy

    The standout issuance currency at the start of this year continues to be GBP, with strategists at RBC today confirming that a €1.5bn deal from the EIB yesterday was its largest new GBP benchmark deal while Ontario’s £1.75bn offering was the largest from a Canadian province.


    It has been a huge week for GBP in new issues but the maturity dates on many of the bonds suggest that talk in some financial media outlets that the surge in issuance reflects the attractiveness of exposure to a post-Brexit UK economy was considered by some as the kind of jingoistic claptrap that led to the UK leaving the EU in the first place.


    Instead of being a vindication of the UK’s decision to go it alone in the big, bad world, traders said that the splurge in GBP issuance is a function of what will likely be a fleeting conflation of factors. Namely; attractive basis swap arbitrage levels for borrowers, relatively high yields versus EUR and pent-up desire to refinance that has been put on hold precisely because of the risk of a no-deal Brexit.


    That so many of the new GBP deals have a December maturity date is evidence of that last point. Looking at the GBP splurge one seasoned basis swapper said today that the sterling surge was a driver for both cable and EUR/USD.


    “There’s been a lot of sterling activity with all sorts involved and there’s been more today so with nothing going the other way in cable we’ve seen cable going down and down and it will continue to do so until it doesn’t work any more and then it will just stop,” said one long-suffering trader.


    He said that standout cable flows today and earlier this week have been in the 5y to 10y area, with 5-years excelling today with a lot of flow at -3.875bps and -4bps, with 7y not far behind amid trading at the same pricing points. So far today the 5y cable basis has traded 0.375bps lower to currently be quoted at a mid-price -4.125bps, with similar southerly moves in both 7y and 10y.


    The GBP issuance which includes deals from Canadian, US, Scandi and EU names (BNPP with a £1bn 10y yesterday, EIB with that £1.5bn Dec 2026 deal on Monday) has fed through to the EUR/USD basis market, providing bids in what is more balanced trading than in cable.


    “Sterling deals going into EUR have provided bids amid a lack of USD deals going back to EUR and supported two-way trading there, with the basis going higher yesterday afternoon, coming back lower later on yesterday and today price action there is pretty balanced, with the front end dragged lower by the first break (3m EUR/USD is -2.375bps at -2.875bps), while the rest of the curve is little changed,” he added. He said the hotspot for EUR/USD so far today has been in 10y at around -16.75bps while generally gamma flows have dragged 20y to 30y lower this week, but haven’t been notably active so far this session. EUR-denominated issuance has generally been a little subdued due to the overbearing presence of the EIB’s €5bn EARN bond issue which priced this afternoon.


    Elsewhere, and once upon a time, the European branch of the basis swap market was a colourful kaleidoscope of currencies, with DKK, SEK, NOK, CHF and of course GBP all regular participants. But in a market that has homogenized, even as the world falls apart in so many ways, that diversity is ever-rarer.


    So it was heartening this week to see Scandi issuance and issuers embracing the winter landscape with some decent cross-border issues in NOK as well as a brace of deals from the Nordic Investment Bank in long 5y GBP, while Kommunalbanken yesterday popped up with a 5y USD, and Swedish Export Credit plans a 2.5y USD offering tomorrow. So far this week the 5y NOK/EUR basis has rallied from a low on Monday of 5.5bps to 7bps at the time of writing.


    While NIB (see below) is based in Helsinki and is a pan-Scandinavian funder, traders suspect an Asian Development Bank 5y NOK deal today might have been behind 5y flow in NOK/USD this morning at -5.375bps (although World Bank also did a NOK5bn 5y floater).


    NIB swaps to EUR; GBP issuance demand, and swap-, driven

    Nordic Investment Bank was one of the big names flocking to GBP today, with a £600m, Dec 2026 offering that priced this afternoon at gilts +24bps. Jens Hellerup, head of funding at NIB, said this afternoon that the deal will be swapped to floating EUR.


    Looking at the plethora of Dec-maturing GBP issues he said that in the NIB’s case, the Dec 2026 maturity was a demand driven, rather than a Brexit-afflicted, choice. “The demand for long 5-years is strong and the swap back to EUR also works better for long 5-years than for straight 5-years,” he said. He added that the Brexit factor is mitigated by the fact that most of the buyers of this bond are UK-based, in contrast to reports in some some outlets that Europeans seeking yield are driving GBP’s booming start to 2021.


    He said that NIB will continue to look at GBP and other funding markets over the next month, noting the strong liquidity that characterizes January in the new year period.


    As for sterling, whether that dries up or not he said will depend on basis, but he isn’t ready to rule out further GBP issuance yet. “It is very difficult to predict basis swap moves nowadays. There has been a lot of sterling issuance lately but it is very hard to say if the basis will move in the way you expect. The challenge for GBP might come from the demand side.”




    On the SDR today, EUR/USD flows were reported in:

    • 5y twice at -11.875bps

    • 8y at -16bps three times

    • 9y at -16.625bps

    • 10y at -18bps, -17bps twice and -17.25bps

    • 12y at -17bps

    • 30y at -15.125bps twice, -15.25bps twice and -15.375bps twice

    • 50y at -7.125bps twice


    Also on the SDR today, flows were reported in:

    • 1y cable at -3bps

    • 4y cable three times at -3.75bps

    • 5y cable twice at -3.875bps, twice at -4bps and twice at -4.125bps

    • 6y cable at -4.125bps

    • 7y cable at -4bps four times

    • 9y cable at -3.875bps

    • 10y cable three times at -3.875bps

    • 15y cable three times at -5.125bps

    • 5y NOK/USD at -5.375bps


    New issues


    GBP new issues:

    • Nordic Investment Bank has just priced a £600m Dec 2026 bond at gilts +24bps via Nomura, RBC (B&D) and TorDom.


    • New York Life is close to pricing a £650m Dec 2028 bond at gilts +60bps or so via Barclays, Deutsche Bank (B&D), HSBC and JP Morgan. Books are £750m.


    • The 415,000 square mile Province of Ontario (France for example is only 247,000 square miles) yesterday priced a whopping £1.75bn, Dec 2026 bond at gilts +38bps via BofA, RBC and TorDom.  


    • BNPP yesterday priced a £1bn long 10y senior non-preferred bond at gilts +105bps via BNPP.


    USD new issues:

    • Swedish Export Credit plans a $500m 2.5y deal tomorrow via Deutsche, HSBC and Nomura.


    • BNPP yesterday priced a $2.25bn, 6 yNC5 fixed-to-floating bond at USTs +90bps via itself.


    • Aercap Ireland Capital yesterday priced $1bn of Jan 2026 NC5 bonds to yield USTs +155bps via Barclays, Citi, JPM, Mizuho, MS, Santander, SG Americas, TorDom, Truist and Wells Fargo.


    • Kommunalbanken yesterday priced a $2bn, 5y bond at swaps +9bps via BNPP, JPM, Nomura and RBC.


    • Deutsche Bank sold a $450m 30y NC5 zero-coupon callable Formosa. The EMTN matures Jan 2051 and is callable annually from Jan 2026. Estimated IRR 3.40%. Leads are DB, E.Sun, Fubon and KGI.


    • Santander sold a $350m 40y NC5 zero-coupon callable Formosa. The EMTN matures Jan 2061 and is callable annually from Jan 2026. Estimated IRR 3.00%. Lead is Yuanta and announced Jan 4.


    SEK/NOK/DKK new issues:

    • The Asian Development Bank has priced a NOK 1bn, 5y ‘Water Bond’ at swaps -5.5bps via Danske. Traders are reporting good flow in trading today.


    • The IBRD yesterday priced a NOK5bn, Jan 2026 NIBOR +150bps FRN at par via Nordea.