GBP Swaps: Four hikes by August? Receivers rule

Red arrow up 2 Feb 2021
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Gilts sold off to catch up with USTs that were heading in the opposite direction. Traders raise eyebrows at market pricing four hikes in seven months.

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  • Four hikes by August? Receivers rule

  • New issues: More taps; True Potential

     

    Four hikes by August? Receivers rule

    A big-picture session provided topsy-turvy screen pricings, with longer-dated USTs rallying 6-8bps after yesterday's sell-off while gilts (and Bunds) partly caught up with yesterday’s big Fed-powered sell-off in USTs. At the close today the 10y gilt was +3bps at 1.23% while 2s/10s and 10s/30s both bear-flattened by around a bp as the front end led the selloff.

     

    A lack of SSA-style GBP bond issuance didn’t stop saw swap spreads from heading south today with 5y, 10y and 30y all dropping by about 1.5bps as receivers swooped in at near three-year high levels in 10y swaps, for example.

     

    Summing up today’s activities one long-standing GBP swapper said that “we’re seeing ASWs tighten as a result of outright receiving on the sell-off. Also there’s been good buying of March MPC and of March futures.” March22 MPC SONIA finished the day at around 0.59%. 

     

    Despite the across-curve sell-off today the swapper said “no-one believes that rate hikes will actually play out as the market is pricing it – ie four hikes by August – but you can’t ignore the Fed when it’s this hawkish. It’s as simple as that.”

     

    New issues: More taps; True Potential

    • Kuntarahoitus Oyj tapped its 3.5y bond 1.125% due Jun 2025 for £50m through HSBC.

       

    • Kuntarahoitus Oyj tapped its 4y bond 0.375% due Dec 2025 for £95m through MS. 

       

    • NRW.Bank tapped its 4y bond 0.5% due Dec 2025 for £125m through HSBC.

       

    • Land NRW tapped its 3y bond 0.625% due Dec 2024 for £250m through TorDom.

       

    • UK wealth manager True Potential (Cinven) plans a £700m equivalent two-tranche bond issue in EUR 5y NC2 and GBP 5y NC2 secured bonds rated B1. Consisting of £400m of 5y NC2 bonds at 6.5% and €360m of 5y NC2 at 5%. Leads are Barclays, CS (B&D), GS, Lloyds, NatWest and UBS.

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