Basis: ECB dampens supply; NIB on GBP and CNY deals

Chinese Yuan
EUR/USD basis flattened on a ECB Day. NIB has been busy in GBP and CNY and discusses those resurgent markets. BNPP eyes USD supply and EUR IRS.

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  • ECB dampens supply; NIB on GBP and CNY deals

  • BNPP: Swapped USD issuance steepens EUR IRS; CHF/USD reverse

  • Flow

  • New issues:


ECB dampens supply; NIB on GBP and CNY deals

The EUR/USD basis curve flattened today with the 30y dipping 1.25bps to -10.75bps, and the first break popping 0.5bps higher to -14.25bps on what was, in truth, a fairly quiet session in core basis markets. This was due to the ECB meeting today (there was no change to rates but plenty of talk of inflation risk) that saw some of this week's issuance front-loaded.


So, there was a pronounced dearth of cross-border issuance in both EUR and USD today, and if it weren’t for the helpful nature of Canadian borrowers things would have been much quieter for EUR. Of the three most recent significant EUR deals, BMO and NIBC (yesterday) accounted for two, while North Carolina's Duke Energy priced the other one this morning.   


Also attempting to keep basis swappers busy and out of trouble this week was the Nordic Investment Bank which as well as pricing a deal in NOK, one of its core currencies, also tapped GBP and CNY markets. NIB sold £350m of July 2026 bonds yesterday and CNY 350m of 2y bonds this morning.


A senior NIB official told TotalDerivatives today that the GBP offering is perhaps a sign of things to come after the gilt market had its early summer shakedown last week. The Helsinki-based official said that “the gilt market underwent a volatile period marked by cheapening (5y gilt yields rose 30bps in the first week of June).”


“So,” he continued, “the recent GBP issuance (IADB sold £500m of 5y at +68bps yesterday) is a sign of subsequent new investor interest although with issuance generally being low lately the GBP supply might stand out more than usual.”


He added that this demand enabled NIB to sell a bigger-than-expected bond and expressed happiness with the spread to gits achieved (which at +57bps was 11bps tighter than the IADB’s slightly longer-dated offering).


Looking the GBP dynamics he said that “it is complex to say that pricing is simply good, if you look at the SONIA spread the pricing might not look so good, but against gilts the spread is good and the all-in funding cost (after swapping to EUR) was good too.”


And looking at NIB’s latest foray into the mysterious world of CNY issuance, the official said that after debuting in the currency last year it has picked up its activity there this year, as the CNY market itself has visibly grown.


This year, said the official, “we’ve seen more demand  -- Hong Kong-based demand we believe. I would speculate that the buyers are shifting from HKD bonds to CNY because the regional location of the investors doesn’t appear to have changed much.”


Looking at the swap aspect (any NIB issuance not in USD, NOK, SEK or DKK is swapped to EUR) the senior official said it was not a transparent process, noting that “we get the swap delivered as part of the package with the bond, so we are not an active participant in the swap.”


He did note though that while its typical CNY bonds are in a CNY 200-350m range (which is only $30-50m in size, though it did sell a CNY 500m bond as year), and so are fairly modest in size, it is noticeable that increasingly “the swap doesn’t seem to be a huge challenge,” even if the precise mechanics of those swaps remain opaque.



BNPP: Swapped USD issuance steepens EUR IRS; CHF/USD reverse

Strategists at BNPP today offered a pair of succinct snapshots of a couple of cross-currency bases, noting how the prolonged imbalance of USD issuance versus EUR in the cross-border issuance market is weighing in EUR IRS.


BNPP said that: " Steepening driven by cross currency trades, issuances in USD, swapping back into EUR, EUR curve was bid". It also said that XCCY swapped USD issuance coming back to EUR can be blamed for EUR ASWs widening and steepening, and tightening in ESTR-BOR across the EST-BOR basis curve.”


And in the CHF/USD basis market, where CHF issuance has been sporadically lively so far this year, it noted that “paying momentum on the CHF USD cross currency has stopped, and basis still seemed being better offered on the back of 150mn 4 yr CHF issuance done with CABEI.” 




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



New issues


USD new issues:

  • Bank of China Ltd Frankfurt (A1/A) plans a USD 3y Green bond at around Treasuries +65bps. B&D is BNPP.


  • Enel Finance NV yesterday priced a $3.5bn 4-part ($750m 3y, $750m 5y, $1bn 10y and $1bn 30y). Leads are Barclays, BBVA, BNPP, BofA, Citi, CA, CS, DB, HSBC, JPM, MS, Santander, SocGen and GS.  Baa1/BBB+.  +145bps, +165bps, +215bps and +245bps.


  • SocGen yesterday priced a $2.65bn 3-part ($600m 3y fixed, $800m 5y and $1.25bn 11y NC10y).  A1/A.  +140bps, +165bps, +320bps. Leads are BofA, Citi, JPM, RBC and SocGen.


  • Australia’s ASB Bank yesterday priced a $600m 10y NC5 Tier 2 sub (A3/A-). Leads are Barclays, Citi, CBA and HSBC. +225bps.


  • CPPIB yesterday priced a $1.5bn 5y through Barclays, CIBC, JPM and TorDom. Swaps +52bps.



  • CoE yesterday priced a $1bn 3y Social Global via DZ, MS, NatWest and RBC.  Swaps +21bps.


  • Hungary (Baa2/BBB) yesterday priced a $3bn 2-part ($1.75bn 7y and $1.25bn 12y at Treasuries +240 and +280bps, respectively), plus a €750m 9y at swaps +250bps. Leads are BNPP, DB, GS, ING and JPM (B&D).


EUR new issues:

  • Duke Energy this morning priced a €1.1bn two-part bond via €600m of 6y at swaps +135bps and €500m of 12y at swaps +175bps. Via Barclays, BNPP, Santander and WFS.


  • Bank of Montreal yesterday priced an €800m 5y at swaps +98bps through BMO, BNPP, CA, DB and NatWest.

  • NIBC Bank yesterday priced a €500m 5y Covered at swaps +11bps through ABN Amro, DZ (B&D), LBBW, TD and UniCredit.


GBP new issues:

  • Export Development Bank Canada plans  benchmark-sized, long 5y GBP bond issue at gilts +72bps via Barclays, HSBC, NatWest and RBC (B&D).  


  • Nordic Investment Bank yesterday priced a £350m long 4y 2.375% due Jul 2026 at gilts 57bps. Leads are HSBC (B&D), Nomura and TorDom.  


  • IADB yesterday priced a £500m long 5y Global 2.5% due Jul 2027 at gilts 68bps. Leads are BofA (B&D), DB, NatWest and RBC.


CHF new issues:

  • Munchen Hypobank has priced a CHF 200m, 1.25%, 5-year bond at 100.435 via Luzerner Kantonalbank and UBS.


  • The Central American Bank for Economic Integration (CABEI) yesterday priced a CHF 155m, long 4y Green Bond at SARON +50bps via BNP and CS.



AUD new issues:

  • DBS Bank Ltd last night sold a AUD500m 3-year FRN through ANZ, CBA, DBS, NAB and Westpac. It pays 3m BBSW + 85bps and matures Jun 16, 2025.



CNY new issues:

  • The Nordic Investment Bank today priced a CNY 350m, June 2024, 3.12% bond at par via Citi.