Basis Swaps: Risk-on in front-end leads flattening

Euros dollars basis
Slivers of hope from Russo-Ukranian talks sparked a decent risk-on move in basis markets, flattening curves and bolstering supply.

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  • Risk-on in front-end leads flattening

  • Flow

  • New issues


    Risk-on in front-end leads flattening

    Slivers of hope from Russo-Ukrainian talks sparked a decent risk-on move in the front-ends of major cross-currency basis swap markets today with first breaks resisting the temptation to head south on USD grabs ahead of quarter-end, and pushing less negative instead. The EUR/USD first break led the move with a 3.75bps shift higher to just -23.5bps, a long way from the -41bps it hit when Russia’s invasion began. The 3m/30y curve was last seen 4bps flatter on the day.


    The risk-on mood extended to the new issuance markets as well, with USD and EUR issuance picking up, although it might be just a coincidence to report that in cross-market issues, it was names from the perceived slightly safer corners of the developed world (Scandinavia and Canada) that seemed most popular/willing today.


    This group included NIB, Swedbank and Danske in USD and SR Boligkreditt and Sweden’s EQT in EUR as well as DNB Bank in GBP. On the Canadians’ side, they popped up via BMO and CDPQ in EUR, CPPIB in USD and TorDom in GBP. 


    Given the skew in favour of bank-type names in many of those particular territories, the supply patterns today seemed to point firmly to some serious spending from like-minded risk-averse investors ahead of their respective quarter ends.


    In USD the issuance stuck strictly to the 3-5y sector, as is traditional, and ranged a little longer in EUR, with Swedish property investor EQT AB planning a 10-12y leg to accompany its 6y EUR issuance tranche.


    The impact of the EUR-denominated issuance on basis markets saw the belly of the EUR/USD curve head lower amid reports of flow at -26.375bps in 5y EUR/USD in the morning, before the afternoon shift towards USD issuance pulled it up to -26bps at the time of writing.


    Meanwhile, a decent $1.4bn 3y FRN from CPPIB that priced this afternoon is seen as a likely source of a flurry of CAD/USD basis flows at 12bps in and around the 3y CAD/USD spot.


    And looking back to Scandi activity and reflecting on Monday’s issuance, BNPP noted the lumpy SR-Boligkreditt yesterday’s issue of a €750m 7-year (covered, swapped back to NOK, it said), which, it said, “explains the paying pressure on Xccy… as we assume it was swapped to Nibor.”


    Upwards pressure in NOK/USD basis from EUR issuance may have provided the circumstances for KfW to swoop in today with a NOK3bn 5y bond that priced at swaps -11bps via SEB.



    Basis trades on the SDR can be seen here: Total Derivatives SDR.


    New issues

    USD new issues:

    • CPPIB has priced a $1.4bn 3y FRN SOFR +33bps FRN via Barclays, BMO, RBC and TorDom.


    • Asian Development Bank is planning a $500m, 5y, SOFR +29bps or so FRN via BMO, Deutsche Bank and Nomura.  


    • Nordic Investment Bank plans a $1.25bn 3y fixed USD bond. Leads are BofA, Citi, Daiwa and RBC. To yield SOFR MS +22bps.   


    • Swedbank plans a USD 3y offering at USTs +110bps and 3y FRN at SOFR equivalent.  Via Barclays, Citi, Goldman, JPM and RBC.


    • Danske Bank yesterday priced a $2bn 2-part ($750m 3y NC2 and $1.25bn 6y NC5). Leads are BofA, Citi, Danske, GSI, Mizuho and TD. Baa2/BBB+. +145bps and +175bps.


    EUR new issues:

    • Bank of Montreal is close to pricing a €1.75bn, 4y Canadian covered bond at swaps +8bps. Leads are Barclays, BMO, CS, DB, HSBC and ING. Book above €2bn.


    • Quebec’s CDPQ plans a EUR 5y through Barclays, BNPP, Natixis and TorDom.


    • Sweden’s EQT is preparing EUR 6y and 10-12y Sustainability bonds. Via BNPP, GS, JPM, MS, Nordea and SEB.


    • Westpac yesterday priced a €1.25bn, Apr 2027 bond at swaps +12bps via Barclays, BNPP, HSBC, UBS and Westpac. 


    • SR Boligkreditt yesterday priced an €750m 7y covered at swaps +9bps through CS, HSBC, LBBW, NordLB and Swedbank.


    GBP new issues:

    • Caixa Bank has priced a £500m, 6y NC5 at gilts +210bps. Via Barclays, BNPP, Caixa and HSBC.


    • DNB Bank has priced a £750m 4y NC3 at gilts +135bps via CS, NatWest and Nomura.


    • Nestle yesterday priced a £300m 5y at gilts +80bps and a £600m 10y at +90bps bond issue via CS, Deutsche, HSBC and RBC (B&D). 


    • TorDom yesterday priced a £1bn, 5y, gilts +150bps bond via Barclays (B&D), Lloyds, NatWest, Nomura, Santander and TorDom. 


    • Ned Waterschaps yesterday priced a £250m, Dec 2024 bond at gilts +60bps via BMO, NatWest (B&D) and RBC.


    SEK/NOK/DKK new issues:

    • KfW today priced a NOK3bn, 2.875% short 5y bond at swaps -11bps via SEB.