EUR Swaps: ECB minutes; Front-end weaker; Long-end flattening

ECB sign
Traders await the ECB minutes, while the front-end trades weaker and the long-end flattens.

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  • ECB minutes awaited; Long-end flattening
  • PEPP buying shows support for OATs - Commerzbank
  • New issues

    ECB minutes awaited; Long-end flattening
    Traders are awaiting the ECB minutes from the September meeting when the bank hiked by 75bp, “It was a hawkish meeting and will be interesting if we get any insight on whether they’re likely to be as hawkish again in September,” said one trader.

    Red Euribors are down by 10-12bps although one trader pointed out that volumes are low with some red contracts trading less than 25k.

    “It’s very quiet today… But I wouldn’t say things have completely settled down. Gilts are on the move, liquidity is down and there is decent flattening on the euro curve while the front-end is lower,” a trader observed.

    In the long-end, EUR 10s/30s down by 5bps to -68.5bps and has now flattened around 10bps over the past couple of sessions.

    Other key events today are seen as long-end sovereign supply with France selling €5.92bn 2032, €2.88bn 2053 and €1.18bn 2066s while Spain is active in 2029, 2032 and 2050s. “I wouldn’t say that a lot of duration hitting the market is really affecting things,” said one trader.

    Elsewhere, the Bund has so far traded a relatively narrow range of 89 ticks and was last down 27 ticks at 139.49. In equities, the EuroStoxx is down by -0.3% while the 10y BTP/Bund spread has narrowed by 2bp to 240bps.


    PEPP buying shows support for OATs - Commerzbank
    Strategists at Commerzbank discuss the latest ECB PEPP purchase data that was published yesterday and find that France saw the strongest support while Italian purchases lagged. It writes:


    • “Following the significant flow support from the ECB during the first months after implementing flexible PEPP re-investments (with some €17bn of net purchases in the periphery at the expense of core during June/July), the ECB has all but suspended its support during Aug/Sep. Net purchases in Italy turned negative by some €1.2bn.

    • “While the negative sign can be explained by timing issues over the thinner summer months (total PEPP purchases were negative by €4.3bn), the data still reveal that the ECB has not followed up with larger purchases. The positive interpretation for BTPs is that key spread levels continue to hold without ECB support despite rising yields.

    • “We suspect, however, that the ECB increased its PEPP support for BTPs during the UK-led bearish spread widening after the Italian election. Only a fraction of these purchases is included in yesterday's data (which only includes trades settled in Aug/Sep), while the ISIN lists show that the Bundesbank has not (yet) bought the BuBill issued in September until Tuesday - and more flows could be re-directed toward Italy with a OBL redemption as of yesterday.

    • “Moreover, the data show that France received the strongest ECB support over the summer. Besides the net PEPP purchases of €2bn during August/September, the net PSPP purchases in France stick out with €7.3bn.”

    New issues

  • Vinci SA is pricing EUR 10y around swaps +90bps through CA (B&D), SocGen, Barclays, Commerzbank, Mizuho, NatWest and RBC.

  • Intesa Sanpaolo is pricing EUR 7.25y Social around swaps +255bps through Barclays, Citi, CS, IMI (B&D), JPM, Mediobanca and MS.

  • Commerzbank is pricing EUR 6y Covered at swaps +6bps through Commerzbank (B&D), DZ, Helaba, NatWest, RBI and TD.

  • Dell Bank International is pricing €500m (max) 5y around swaps +190bps through BofA, DB, GS (B&D) and SocGen.

  • Euroclear is pricing €500m (max) 5y around swaps +105bps through Citi, GS, ING (B&D), JPM and MUFG.

  • Carlsberg Breweries is pricing €500m (max) 3y around swaps +85bps through Nordea, SocGen and UniCredit (B&D).