USD Swaps: '23 kicks off with cross-asset rally, issuance surge

Chart green 14 Jun 2022
2023 has kicked off with a cross-asset rally and global spread tightening as a rush of new issuance arrives.

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  • 2023 kicks off with cross-asset rally after brutal year

  • Bank issuance seen lower in 2023: Barclays

  • New Issues: EIB, HK, SocGen, SMBC, CBA, Posco


    2023 kicks off with cross-asset rally after brutal year  

    Gains for USTs to start the year were matched by a rise in Bunds (see Total Derivatives) and higher S&P futures today, the latter following 2022’s brutal 19% plunge. Treasury yields are 7-14bps lower led by the 10y at 3.74% (-14bps) while dollar swap spreads are 0.25-0.50bps tighter in the belly as issuance returns with 5s at -25.75bps (-0.25) and 10s at -32.25bps (-0.25). In contrast,  the long end of the spread curve is better bid with 30s at -75.25bps (+1.00).


    Ahead, as traders mull the chances of recession - and the impact on Fed policy - in the near term the market faces ISM, FOMC minutes and non-farm payrolls over the next few days, followed by Fedspeak from Barkin and Bostic at the end of the week.     


    Bank issuance seen lower in 2023: Barclays  

    As dollar FIG deals arrive from a range of issuers today- including SocGen, UBS, TorDom, CBA and SMFG – analysts at Barclays consider how much bank issuance the market can expect in 2023. They find that:


    • “Expect approximately $260bn in US bank issuance, down 5% from $273bn in 2022…Slower and more targeted balance sheet growth should reduce the upside risk to supply…While maturities total $56bn, potential redemptions could total $131bn, including bonds callable in 2023. A potential regulatory change applicable to the GSIBs (SLR relief) could also reduce their debt issuance needs starting next year.”


    • “Big 6 aggregate quarterly maturities are skewed to 1Q23, relatively balanced thereafter. Of the $56bn of Big 6 maturities in 2023, almost half ($27bn) comes due in in 1Q23, driven by GS ($9bn) and MS ($7bn). The remaining $29bn is relatively evenly spread across 2Q-4Q (ranging from $8bn to $11bn per quarter).”


    • “Maturities and callables in 2023 are about 20% higher than they were in 2022, but we expect debt needs beyond redemptions to decline y/y. Continued quantitative tightening and RWA constraints should limit balance sheet growth and reduce funding needs from unsecured debt relative to last year. We expect the biggest negative swings in net supply from BAC, JPM and MS, but believe GS could bring more net supply this year.”


    • “Expect net supply from the Big 6 to decline from record levels last year. There are $75bn of Big 6 callable bonds in 2023, the majority of which we expect to be redeemed during the year. We forecast 2023 net supply from the Big 6 to decline approximately 50% y/y to $45bn, which would be consistent with the historical average.” 


    New issues: EIB, HK, SocGen, SMBC, CBA, Posco  

    • EIB plans a USD 5y Global at around swaps +41bps. Leads are Barclays, Citi and TorDom.


    • MetLife is preparing USD 3y fixed FA, 3y FRN FA, 5y FA and 31y bonds. Seen in the area of Treasuries +100bps, SOFR equivalent, +130bps and +170bps. Leads are BofA (B&D), DB, HSBC, JPM and MS.


    • Targa Resources plans USD long 10y and 30y bonds at around Treasuries +260 and 300bps. Leads are MUFG, RBC, TorDom and TSI.


    • Hong Kong SAR (Aa3/AA+/AA-) is preparing USD 3y, 5y and 10y, EUR 2y and 7y and CNH 2y and 5y Green bonds after meeting investors on Jan 3. Leads are: BNPP (USD and EUR), BofA (USD and EUR), BoC (CNY), Citi (USD and EUR), CA (USD, EUR and CNY), HSBC (USD, EUR and CNY), ICBC (CNY), JPM (USD and EUR), Mizuho (CNY) MS (USD and EUR), StanChart (CNY) and UBS (USD and EUR).


    • SocGen plans USD 4y NC3 FRN, 4y NC3, 6y NC5 and 11y NC10 SNP (Baa2/BBB/A-) at around Treasuries plus 250, 275 and 315bps. The fixed rate callable tranches swap to fixed. It also plans a USD  30y Tier 2 sub at around Treasuries +375bps. Leads are   BofA, Citi, JPM, RBC, SocGen (B&D) and StanChart.


    • UBS Group (A-/A+) is preparing USD 4y NC3 and 11y NC10 bonds at around Treasuries +180 and 250bps. Self-led.


    • TD Bank is preparing USD 3y fixed, 3y FN and 5y fixed bonds at around Treasuries +115bps, SOFR equivalent and +145nps.


    • Enterprise Products plans USD 3y and 10y bonds in the region of Treasuries +110 and 180bps. Leads are BofA, JPM (B&D), MS and RBC.


    • John Deere Capital is preparing USD 3y fixed, 3y FRN and 5y bonds via BofA, DB, GS and RBC (B&D).  


    • Korea’s Posco plans USD 3y, 5y and/or 10y bonds after meeting investors Jan 3. Leads are BNPP, Citi, CA, HSBC and StanChart.


    • CBA (Aa3/AA-) is preparing USD 2y fixed and floating rate notes at around Treasuries +90bps and SOFR equivalent. Leads are CBA, HSBC, JPM and WFS.


    • SMFG plans USD 3y fixed, 3y FRN, 5y fixed, 7y fixed and 10y fixed. Seen at around Treasuries +150bps, SOFR equivalent, +180, +205 and +220bps, respectively. Leads are GS, Jefferies, JPM and SMBC Nikko (B&D).