EUR Swaps: Gilts still leading; Risk-off helps ASWs; 3s6s interest

Down candle chart 26 May 2022
Gilts have dragged Bunds lower while risk-off is support swap spreads.

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  • Gilts still leading; Risk-off helps ASWs; 3s6s interest 
  • Stay neutral Schatz OIS spread - JPM
  • New issues


    Gilts still leading; Risk-off helps ASWs; 3s6s interest
    “Gilts are still leading Europe at the moment, particularly during European trading hours,” said one euro trader today as the gilt future dropped 1.6 points while the Bund future has lost 60 ticks. Elsewhere, stocks have reversed some of yesterday’s impressive gains with the EuroStoxx last down by -0.9%.

    Meanwhile euro new issuance continues to see a revival with a mix of banks and corporates among the names looking to price deals today.

    However, swap spreads are wider despite one trader agreeing it was likely a few deals would be getting swapped. “Risk-off is prevailing over any spread receiving flows,” he suggested.


    Last prices saw the Bobl ASW at 100.2bps (+2.4bp) and Bund ASW at 100.8bps (+1.4bp). The iTraxx Europe IG CDS index is 3bps wider but, unlike last week, spreads for new deals are coming in a bit as they price, the same trader noted.

    In basis, 3s6s has caught a bid after the sharp tightening seen over the past couple of weeks. “When 5y5y goes bid that typically means there could be some new issuance,” said one trader. Others suggest interest in 5y5y 3s6s could signal interest from hedge funds. 


    Stay neutral Schatz OIS spread - JPM 

    In its weekly rates research JP Morgan stays neutral on the Schatz OIS swap spread. The bank finds spreads appear to be at fair value although are slightly expensive vs its medium-term target. However, the bank warns that year-end funding pressure and limited availability of balance sheet could result in short-end swap spreads staying wide or possibly richening further. The bank writes:

    • “Schatz swap spreads now appear broadly fair versus its fundamental drivers, driven by a combination of wider peripheral spreads and normalisation of repo rates. We look at the evolution of the spread between German RFR repo index and the RFR German GC rates which broadly reflects the average richness of German paper versus GC. A narrowing of this spread over the last few days has reduced the richness of Schatz swap spread in our model.

    • ”We continue to believe that the medium term fair value of Schatz OIS spread is around 60-65bps but refrain from outright positioning as near term risks are biased for this spread to remain wide on wider peripheral spreads and increasing year-end funding pressure with limited availability of balance sheets.”


    New issues

  • Commerzbank plans a EUR 6y Covered bond through Commerz, DZ, Helaba, NatWest, RBI and TD. 


    Flemish Community is pricing €750m 10y at OLOs +40bps and €1.25bn long 20y at +36bps. Leads are DB, HSBC (B&D), ING and UniCredit.

  • Deutsche Bahn Finance is pricing €500m (max) 20y at swaps +115bps through Barclays (B&D), BNPP, LBBW and RBI.

  • EDF is pricing €750m long 4y, €1bn 7y and €1.25bn 12y Green at swaps +115bps, +165bps and +195bps. Leads are Barclays, BNPP (B&D), CA, BofA, DB, Mizuho, Natixis, SocGen and WFC.

  • EIB is tapping €1bn 3.0% Oct 2033 EARN at swaps -5bps through BofA, Citi (B&D) and UniCredit. Latest order book size above €4.4bn.

  • Estonia is pricing €1bn 10y at swaps +105bps through Citi (B&D), GS and SocGen.

  • Axa SA is pricing EUR 8y around swaps +110bps through Citi, CA, BNPP, HSBC, Natixis and SocGen.

  • BBVA is pricing €1.25bn 7y Green at swaps +155bps through Barclays, BBVA (B&D), BNPP, Commerzbank and SocGen.

  • Carrefour is pricing €500m (max) 6y SLB at swaps +145bps through BNPP, IMI, Natixis (B&D) and Santander.

  • Caisse Refin l’Habitat (CRH) is pricing €1.85bn long 5y Covered at swaps +10bps through BLB, CA, HSBC, LBBW (B&D), Natixis and SocGen.

  • Ceske Drahy is pricing €500m (max) 5y Green around swaps +300bps through Erste, ING, UniCredit (B&D) and SocGen.

  • Dell Bank, a subsidiary of US company Dell Technology, plans to sell €500m (max) 5y after investor calls on 5 October. Leads are BofA, DB, GS and SocGen.

  • CDP Reti plans to sell EUR 5y through BNPP, IMI, Mediobanca and UniCredit.

  • Credit Agricole is pricing €1bn 4y NC3 Social at swaps +135bps through itself.

  • ALD SA is pricing €600-750m 3y at swaps +200bps through SocGen.