EUR Swaps: Rally stalls as big syndications arrive

Euro notes pile


  • Rally stalls as big syndications arrive 
  • Wages are adjusting, not spiralling - Barclays
  • New issues


    Rally stalls as big syndications arrive
    The euro fixed income rally appeared to stall today with the 10y Bund future last trading near unchanged. Earlier, Italian CPI printed in-line with the Bloomberg forecast at 12.3%yoy, down from 12.6% the previous month. Elsewhere, the front-end of the euro inflation curve remained under pressure with EUR 1y HICP down 26bps at 3.04%, almost 50bps lower over the past two sessions.

    Meanwhile a duration intensive session of sovereign supply has seen Portugal price €3bn 15y with orders above €17.9bn and Ireland €3.5bn 20y Green with orders above €35bn.


    “A lot was written at the end of last year about the size of net-net sovereign supply, so I think the market has been well prepared,” argued one trader, reflecting on the price action over the past few sessions that has seen the EGB market rally.

    However, he was slightly surprised at the tightening in swap spreads seen over the past few sessions, “It’s a trade (seasonal spread tightening in January) that has fallen out of favour in recent years - too crowded and not enough juice perhaps,” he said.

    As for today, Bund asset swap spreads have pushed 2-3bps wider, “Anyone short will probably be quick to take some profit,” he reckoned. In basis, 3s6s was "not doing much" while on the screens it was being marked about 0.05bp tighter across the belly. 


    Next up, the US ADP figures at 14:15 CET are seen as the near-term driver for the euro market with the Bloomberg consensus +150k compared to +127k the previous month.


    Wages are adjusting, not spiralling - Barclays
    In a research note published today, Barclays finds that wages in the euro area are adjusting higher but not spiralling. It writes:

      “Wage momentum is still modest in the euro area, in line with our expectation, as the institutional features of the wage-setting process in numerous European countries have prevented a dynamic and complete pass-through of elevated prices into wages. This contrasts with the US and UK experiences, where pay growth in Q4 22 was 6-7% y/y… We believe the data confirms our long-held view that we are witnessing a gradual adjustment to terms-of-trade shocks. While we expect this process to continue, it is unlikely to trigger a wage-price spiral.”


    New issues

  • Ireland is pricing €3.5bn 20y Green at swaps +43bps through BNPP, BofA, Danske, DB (B&D) and Nomura. Latest order book size reported to be above €35bn.

  • Portugal is pricing €3bn 15y at swaps +75bps through Barclays, BNPP, GS, JPM (B&D) and MS. Latest order book size reported to be above €17.9bn.

  • E.On is pricing EUR 5y around swaps +90bps and 12y Green around swaps +140bps through Commerzbank (B&D), JPM, MS and MUFG.

  • EIB is pricing €5bn 10y EARN at swaps +6bps through Citi, GS (B&D), Natixis and SocGen. Latest order book size reported to be above €22.5bn.

  • BFCM is pricing EUR 10y Tier 2 around swaps +255bps through CIC, GS, JPM and SocGen.

  • CA Home Loan SFH is pricing €1bn 6.5y Covered at swaps +24bps through ABN Amor, Commerzbank, CA (B&D), ING, LBBW and SocGen.

  • Rentenbank is tapping €325m 2029 at swaps -10bps through CA (B&D), LBBW and Rabobank.

  • UniCredit Bank is pricing €1bn 3.5y Covered at swaps +3bps through Commerzbank, Helaba, ING, Natixis and UniCredit (B&D).