EUR Swaps: Issuance deluge tightens spreads; 3s6s forwards paid

Chart numbers candles 14 Jun 2022
A global fixed income rally is underway. In euros, German regional CPIs reassured while traders are busy with a deluge of issuance.

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  • Global rally; German CPIs; Issuance deluge
  • Close out short 10y Bund - BNP Paribas
  • New issues

    Global rally; German CPIs; Issuance deluge
    A global fixed income rally is underway, recouping much of the sharp selloff that occurred into the 2022 year-end, leaving the 10y Bund future last up around 55 ticks despite paring early gains, while the gilt future is still trading over a point higher.

    Some dealers highlighted the global nature of today’s fixed income rally. “US Treasuries are performing well and we’re not quite sure what is driving it,” said one euro trader, “Perhaps it’s some positioning ahead of the jobs data and Fed minutes,” he suggested.

    Back in euros, regional German CPIs printed on the “slightly softer side” earlier and helped fuel the gains in euros, a source felt. In the short-end, red Euribors have rallied up to 5bps although volumes are still on the low side at around 35k per contract. Still, euro HICPx swaps are around 3bps firmer at the front of the curve, even with oil and gas futures lower.

    Elsewhere, a major theme has been the huge pick-up in new issuance as over a dozen deals are set to price today including several banks. Among them are ABN Amro, BBVA, BNP Paribas, Credit Agricole, Danske, Rabobank and Santander, while most of the issuance activity is concentrated across the 7y to 10y sector.

    In terms of swap flow, one trader reported some receiving going through that was most likely “on the back of issuance activity”. Asset swap spreads are 1 or 2bps tighter he noted, “That’s a bit unusual with the rally that’s going on and probably reflects some swapping (of new issues)".

    At the same time, 3s6s basis has also been bid with 10y marked up 0.65bp today and around 1.5bps higher than the end of last year. “There’s been paying interest in forwards,” a trader observed.

    Finally, the first sovereign syndications of 2023 are hitting the screens. Austria has announced it plans to sell EUR 10y through Barclays, BofA, DB, GS, JPM and UniCredit. Elsewhere, KfW is working on a EUR 5y deal as well as pricing £1.25bn long 3y today. EIB has announced a 5y USD Global. 


    Close out short 10y Bund - BNP Paribas
    In a strategy note published this week BNP Paribas closes out its short 10y Bund position, entered at 1.99%, for a profit. The bank explains:

      “Following the hawkish ECB meeting and important development overseas, EGB yields reached new highs, with the Bund breaching our 2.50% target. While we maintain our 2.75% yield forecast for 10y Bunds by Q1 2023, we prefer tactically to take profit at this stage. The sharp repricing seen in recent weeks increase the odds that eh early wave of January supply is well absorbed, which could trigger a temporary rally. If sizeable, we would recommend going short, subject to timing.


    New issues

  • Austria plans to sell EUR 10y through Barclays, BofA, DB, GS, JPM and UniCredit.

  • BPCE is pricing EUR SNP long 5y around swaps +155bps and 10y around swaps +175bps. Led by Natixis.

  • Berlin Hyp is pricing €500m (max) 3y Social around swaps -4bps and €500m (max) 10y Green around swaps +11bps. Leads are Barclays, CA, Erste, LBBW, Natixis and UniCredit.

  • Axa is pricing €750m 10y at swaps +75bps through HSBC (B&D), Natixis, BNPP, DB, RBC and SocGen.

  • Danske Bank is pricing EUR 4y NC3 at swaps +115bps and EUR 8y NC7 Green at swaps +125bps. Led by Commerzbank, Danske (B&D), HSBC, ING, Santander and SocGen.

  • BBVA is pricing €1bn 8y NC7 SNP at swaps +170bps through Barclays, BBVA (B&D), BNPP, CA and JPM.

  • BNP Paribas is pricing EUR 8y NC7 around swaps +95bps through BNPP.

  • Santander is pricing €3.5bn Covered 3y around swaps +22bps and 7y around swaps +47bps. Led by Santander (B&D), Barclays, Commerzbank, CA, DB and Natixis.

  • Rabobank is pricing EUR 7y SNP at swaps +110bps through BofA, CA, DB, Rabobank and UBS.

  • RLB Noe-Wien is pricing EUR 7y Covered around swaps +35bps through Barclays, BayernLB, Danske, Erste (B&D), RBI, SocGen and UniCredit.

  • Toyota Motor Finance is pricing EUR 3y around swaps+60bps and 5y around swaps +85bps. Leads are CA, DBS, Mizuho, SocGen (B&D) and UniCredit.

  • KfW plans to sell EUR 5y through BNPP, DB, JPM and MS.

  • RCI Banque is pricing EUR 3.5y around swaps +190bps through BBVA, IMI (B&D), MUFG and Natixis.

  • ABN Amro is pricing EUR 2y FRN around 3mE +60bps and 3y around swaps +80bps. Led by ABN (B&D), CS, DZ, JPM and SocGen.

  • Credit Agricole is pricing EUR perp NC6 Additional Tier 1 around 7.625% through CA.