USD Swaps: Bullard flashes yield sign; Flattening theme pre-NFP

Chart 24 Nov 2021
Bullard gave a bone to doves looking for a signal to the cessation of hikes this afternoon, but yields remained higher ahead of NFP.

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  • Bullard flashes yield sign; Flattening theme  

  • Non-farm payrolls preview – Barclays

  • New issues


    Bullard flashes yield sign; Flattening theme  

    Treasuries remain mostly lower on the day with yields anywhere from 1.2bps lower to 9.6bps higher in a strong bear flattening move ahead of NFP. The 10y note yield is last 3.716% or 2.6bps higher in yield on the day. 2s10s is 6.4bps flatter at -73.5bps while 5s30s is off a significant 7.5bps lower at -11.5bps after remaining near steady in two previous two sessions.  Equities ended lower (DJIA -1.02%, S&P -107% and Nasdaq -1.47%).


    St. Louis Fed President Bullard, who led the charge on aggressive tightening last year, appeared more conciliatory today in a presentation saying that while the policy rate “is not yet in a zone that may be considered sufficiently restrictive,” it is “getting closer.”


    For NFP tomorrow, sources note that today’s employment data was stronger, and thus the whispers are for potential higher upside than forecast. USTs had bull flattened earlier this week, but today one source judged that  some would be doves “blinked and took chips off the table ahead of the data tomorrow.” The options market currently sees a realized move in the 10y of around 8.5bp for tomorrow, sources point out.


    Swap spreads narrowed in today in a modest move, with the spread curve steepening out a touch in the back end of the curve. SSAs swapping factored in more today as IADB came with a $2bn 5y and ADB priced a $5.5bn 2-part ($3.5bn 3y and $2bn 10y). In IG issuance ex-SSA, a total of $4.45bn priced across three issuers – with the bulking coming from Yankee FIGs (Bank of Montreal’s $2.5bn 3-part and Credit Agricole’s $1.25bn 5.5y). The weekly volume is now $58bn or nearly 50% more than the $35-$40bn expected.


    Currently, SOFR swaps 2s 2.5bps (+0.25bps), 3s -16.25bps (+0.125bps), 5s -27bps (+0.125bps), 7s -34.75bps (-0.375bps), 10s -33.125bps (-0.25bps), 20s -67.375bps (unch), 30s -74.25bps (+0.25bps).



    Non-farm payrolls preview – Barclays

    Analysts at Barclays expect nonfarm payroll employment to rise 200k in December, following November's 263k gain, “reflecting a gradual deterioration in the hiring rate.”


    It expects “a similar deceleration in private payrolls, from +221k to +175k” which would put payrolls on pace “to average around 249k per month in Q4, due to the Fed's tightening in financial conditions gaining increased traction on labor demand.”


    Meanwhile, Barclays expects “little to no change in wage pressures, with average hourly earnings rising 0.4% m/m (5.0% y/y), similar to the average pace since late 2021” and it also expect the workweek to “remain flat at 34.4 hours, reflecting increases in the share of part-time workers.”


    “On the household side of the report, we expect the unemployment rate to edge up 0.1pp, to 3.8%, with the labor force participation rate poised for a modest increase, similar to last month.”



    New issues


    • Woori Bank (A1/A+) plans a USD 3y or 5y Sustainability Bond after meeting investors Jan 9. Leads are BofA, BNPP, CA, MUFG, SocGen and StanChart.


    • Korea’s SK Hynix (Baa2/BBB-) is preparing USD 3y, 5y SLB and/or 10y Green bonds after meeting investors Jan 5. Leads are BofA, BNPP, Citi, CA, HSBC, MUFG and StanChart.


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


    • Bank of Montreal launched a $2.5bn 3-part ($1bn 2y fixed, $300m 2y FRN and $1.2bn 5y). Leads BMO, BofA, Citi, JPM and MS.  A2/A-/AA-.  +80bps, SOFR +71bps, +130bps.


    • Romania (Baa3/BBB-) launched a $3.75bn 3-part ($1bn 5y, $1.5bn 10y and $1.25bn 30y). Leads BNPP, HSBC (B&D), ING, RBI and UniCredit. +280bps, +350bps and +385bps.


    • HK Airport Authority (AA+) launched a $3bn 4-part ($500m 3y, $1bn 5y Green, $700m 7y and $800m 10y). Leads BofA, HSBC (B&D), JPM, StanChart and UBS. +70bps, +90bps, +115bps and +125bps.


    • Credit Agricole priced a 1.2bn 5.5y. Leads CA, GS, JPM, TorDom and WFS. Aa3/A+/AA-. +140bps.


    • ADB priced a $5.5bn 2-part ($3.5bn 3y and $2bn 10y). Leads Citi, Nomura, RBC and TorDom. Aaa/AAA/AAA. Swaps +29 and 60bps.


    • Penske Truck priced a $2bn 5y. Leads BofA, JPM, PNC, SMBC and WFC.  Baa2/BBB/BBB+.  +185bps.


    • IADB priced a $2bn 5y Global. Leads Barclays, BofA, HSBC and JPM.  Aaa/AAA. Swaps +41bps.


    • World Bank (IBRD) priced a $1.75bn 4y FRN. Leads BMO, Scotia and WFS. Aaa/AAA. SOFR +37bps.