USD Swaps: Spreads resist issuance surge; FOMC minutes

Fed sunny 9 Jun 2022
Swap spreads today resisted the latest phase of the new year issuance surge. Ahead, banks preview the looming FOMC minutes.

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  • Spreads resist issuance surge

  • New Issues: Deluge continues


    Spreads resist issuance surge  

    Swap spreads – and UST yields – are proving resilient in the face of the latest surge in issuance today with spreads indicated at -27.125bps (+0.25) in 10s, -33.75bps (+0.50) in 10s and -76.00bps (+1.5bps ) in 30s, after tightening by a couple of bps in the belly yesterday. Still, outright SOFR volumes are mostly below-average so far (link) according to the SDR and Treasuries are in the green again with the 10y at 3.67% (-7bps) against a backdrop of stronger stock futures, lower oil prices and tighter IG credit spreads.


    In the news, JP Morgan’s weekly Treasury Client Survey showed the ‘All clients’ net short balance increased slightly to -13% in the week to Jan 3 from -11% on Dec 12, but the ‘Active clients’ net short decreased to -44% from last month’s very short reading of -67%.     


    Next up, following the ISM Manufacturing index (the Bloomberg survey consensus is for a small drop to 48.5 from 49.0) and the JOLTS data, the Fed will release minutes from the December 14th FOMC meeting. BNP Paribas previews the report and expects the minutes to reaffirm a “hawkish tone” since officials “shrugged off” weaker-than-expected CPI and were “not satisfied” with the pace of cooling in the labor market. BNPP continues:


      “Tension between market pricing and the Fed's interest rate intentions remains unresolved, in terms of both level and duration. At the December FOMC meeting, the dot plot median shifted toward a terminal fed funds rate of 5.25%, consistent with our expectations. The market is not pricing the rates to cross above 5.00% and expects the Fed to start cutting rates in the second half of the year, while the Fed does not have any cuts built into their projections for 2023.”


      “Since the FOMC meeting, a choir of policymakers reiterated the hawkish 'higher for longer' message from Chair Powell's press conference…We maintain our view that the Fed will be more hawkish than markets expect in 2023 (terminal pricing: 5.16%, 42bp of rate cuts in 2023) and more dovish than markets expect throughout 2024-2025…We continue to believe Fed cuts are mispriced relative to our economic forecasts (200bp of cuts in 2024) and the Fed's SEP (100bp of cuts in 2024, 100bp of cuts in 2025)”.


    New issues: Deluge continues  

    • EIB plans a $5bn Global via Barclays, Citi and TD at swaps +39bps. 


    • ADB is preparing USD 3y and 10y Globals at around swaps +32 and 62bps. Leads are Citi, Nomura, RBC and TorDom.  Expected to price Jan 5.


    • IADB plans a USD 5y Global at around swaps +41bps through Barclays, BofA, HSBC and JPM.  Expected to price Jan 5.


    • Hungary (Baa2/BBB)  is preparing USD 5y, 10y and 30y bonds at around Treasuries +260, 300 and 350bps, respectively. Leads are BNPP, Citi, DB, GS and JPM (B&D).


    • Rabobank plans USD 2y fixed and FRN at around Treasuries +80bps and SFR equivalent. Leads are Barclays, JPM, MS, Rabo and RBC.


    • Nomura Holdings plans USD 3y, 5y and 10y bonds at around Treasuries +175, 215 and 265bps respectively. Leads are BofA and Nomura (B&D).


    • Credit Suisse is preparing USD 2y fixed, 2y FRN and 5y bonds at around Treasuries +387.5bps, SOFR equivalent and +387.5bps. Self-led.


    • StanChart plans USD 4y NC3 fixed, 4y NC3 FRN and 6y NC5 bonds in the region of Treasuries +225bps, SOFR equivalent and +265bps. Leads are Barclays, DB, JPM (B&D), MS and StanChart.


    • NAB is preparing USD 3y fixed, 3y FRN, 5y and 10y sub bonds in the region of Treasuries +100, SOFR equivalent, 130 and 300bps, respectively.  Leads are Bofa, Citi, GS, MS and NAB.


    • GM Financial plans USD 5y and 10y bonds at around Treasuries +225 and 285bps. Leads are BofA, Barclays, BBVA, Commerzbank, DB and GS.


    • Kexim plans USD 3y and 5y, plus a 10y Blue bond. Seen at around Treasuries +85, 120 and 145bps, respectively, via ANZ, BNPP, BofA (B&D), Citi, HSBC, KB and MS.


    • Posco is working on a USD 3-part (3y, 5y and/or 10y). Leads are BNPP, Citigroup, Credit Agricole, HSBC and Standard Chartered. Baa1/A-.    


    • Indonesia is preparing USD 5y, 10y and 30y bonds at around 5.15%, 5.5% and 6.15% respectively. Leads are BofA, DBS, HSBC (B&D), Mandiri and StanChart.


    • Hong Kong SAR (Aa3/AA+/AA-) is preparing USD 3y, 5y and 10y, EUR 2y and 7y and CNH 2y and 5y Green bonds. USD tranches seen at around Treasuries +35, 70, 95 and 145bps respectively. 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).


    • TD Bank yesterday priced a $2bn 2-part ($750m 3y and $1.25bn 5y). Self-led. A1/A. +95bps and +125bps.


    • SMFG yesterday priced a $5.8bn 5-part ($1.5bn 3y fixed, $300m 3y FRN, $1.5bn 5y, $1bn 7y and $1.5bn 10y). Leads are GS, JPM, Jefferies and SMBC Nikko (B&D). A1/A-. +130bps. SOFR +143bps, +160bps, +185bps and +200bps.


    • Societe Generale yesterday priced a $5bn 4-part ($1.25bn 4y NC3 SNP, 6y NC5 SNP, $1.5bn 11y NC10 SNP and $1bn 30y sub). Callables are fixed to fixed. Baa2/BBB/A- for first 3 tranches and Baa3/BBB-/BBB for the 30y. +230bps, +255bps, +295bps, +350bps. Self-led.


    • UBS Group yesterday priced a $4bn 2-part ($1.75bn 4y NC3 and $2.25bn 11y NC10). Self-led. A-/A+. +155bps and +220bp.  


    • MetLife yesterday priced a $2.15bn 3-part ($650m FA 3y, $500m FA 5y and $1bn 31y). Leads BofA, DB, HSBC, JPM and MS. Aa3/AA-/AA- for first two tranches and A3/A-/A- for 31y. +83bps, +113bps and +140bps.


    • John Deere Capital yesterday priced a $2.3bn 2-part ($1.2bn 3y fixed and $1.1bn 5y). Leads are DB, BofA, GS, RBC. A2/A. +65bps and +85bps.


    • Caterpillar Financial yesterday priced a $900m 3y fixed. Leads are Barclays, JPM, SocGen. A2/A/A. +63bps.


    • Ford Motor Credit yesterday priced a $2.75bn 3-part ($1.3bn 3y fixed, $300m 3y FRN and $1.15bn 7y). Leads are DB, BofA, HSBC, Mizuho and RBCCM. Ba2/BB+/BB+. 7%, SOFR +295bps and 7.375%.