USD Vol: 10y tails sink lower; ULC holds up

Blue chart 1 Jun 2021
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The right side of the surface is saw selling pressures with 1y10y and 6m10y trading down. The left side remains better bid for the most part.

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  • 10y tails sink lower; ULC holds up

  • New structured notes

     

    10y tails sink lower; ULC holds up

    USTs are last in a bear flattening move of up to 6bps, led by the 2y. Equities are last near lows of the day (DJIA -2.21%, S&P -2.68% and Nasdaq -3.8%) while UK rates ended anywhere from 13bp higher to 10bps lower in a flattening move. With this backdrop, the vol surface has turned lower with 10y tails leading the move lower today.

     

    1y10y traded as high as 895bps this morning, but has subsequently traded down at 886bps, and then 881bps and is now mid around 871bps, sources say. Similarly, 6m10y started off the day at 667bps offered, and then traded at 653bps, 652bps and then 643bps or around 2 normals lower on the day. One source noted that 10y tails have started to come in with the underlying rally in rates and for the most part is directional to rates. 

     

    Meanwhile, a source pointed to an “annoying bid” on the left side intermediates, with for example 3y1y well bid and CFS such as 2x3 trading higher, but with offers coming in recently. 3y1y traded this morning at 209bps, but is now last offered at 208bps while 2x3 CFS dealt at 193.5bps and then up at 194bps and is now offered at 194bps. Further out, 7y1y traded at 233bps and then 235bps on a total of $450m. One source suggested that “a lot customer flows” have been “taking dealers out of positions” and therefore dealers have scrambled to replace. "They still have a lot of risk to cover," he remarked. 

     

    Shorter in, 1y1y traded at133.5bps versus a switch of 1y5y at 552bps, and 1y1y also traded recently at 134bps versus 3m2y at 130bps, sources say. In other ULC, 2y1y traded at 184.5bps on $400m.

     

    As for long expiries, 15y15y traded at 2515bps, 7y30y dealt at 3280bps, 5y5y dealt at 930bps on a total of $200m and 15y5y traded at 1073bps.  For more, please see SDR trades.

     

     

    New structured notes

    For a complete review of USD MTN activity over the past week, please see USD MTNs.

     

    • Goldman Sachs is working on a self-led fixed callable maturing Oct 2027 NC1 that pays 6.25%. Domestic MTN.

       

    • Goldman Sachs is working on a self-led fixed callable maturing Oct 2025 NC1 that pays 5.75%. Domestic MTN.

       

    • Barclays is working on a self-led floating callable maturing Dec 2025 NC1m that pays O/N SOFR + 402bps. Credit linked to the Republic of South Africa. EMTN.  

       

    • Barclays is working on a self-led floating callable maturing Oct 2025 NC1 that O/N SOFR flat. EMTN.

       

    • Citigroup is working on a self-led fixed callable maturing Apr 2024 NC6m that pays 5.2%. Domestic MTN.

       

    • Citigroup is working on a self-led fixed callable maturing Oct 2025 NC1 that pays 5.7%. Domestic MTN.

       

    • Citigroup is working on a self-led fixed callable maturing Oct 2027 NC1 that pays 6%. Domestic MTN.

       

    • Citigroup is working on a self-led fixed callable maturing Oct 2024 NC1 that pays 5.45%. Domestic MTN.

       

    • Citigroup is working on a self-led fixed callable maturing Oct 2025 NC1 that pays 5%. EMTN.

       

    • Citigroup is working on a self-led fixed callable maturing Oct 2025 NC1 that pays 5.55%. EMTN.

       

    • Bank of Montreal is working on a self-led $50m fixed callable maturing Oct 2025 NC2 that pays 5.1%. Also putable Apr 2023. EMTN.

       

    • Bank of Montreal is working on a self-led FRN putable maturing Oct 2025 that pays O/N SOFR. Putable Apr 2023. Private placement.

       

    • Bank of Nova Scotia is working on a self-led fixed callable maturing Apr 2025 NC3m that pays 5%. Domestic MTN.

       

    • Bank of Nova Scotia is working on a self-led $50m fixed callable maturing Oct 2025 NC2 that pays 5.18%. Also putable Apr 2023. EMTN.

       

    • Standard Chartered is working on a self-led fixed callable maturing Oct 2027 NC2 that pays 6%. EMTN.