EUR Swaps: Positioning and CPI eyed amid rally

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Bunds are rallying alongside global fixed income as traders eye positioning and CPI. Spreads are a touch tighter and top right vol is down again.

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  • Positioning and CPI
  • EUR 10s/30s steepening bias - JPM
  • New issues

    Positioning and CPI
    Bunds are posting gains alongside global fixed income with gilts outperforming today having begun rallying following the BOE unwind operation late yesterday, see GBP Swaps: Mystery late rally. The 10y Bund future was last up by one point while the 10y yield has declined by 5bps to 2.25%. Top right euro vol is down sharply again with 1m10y and 1m30y both around 5nvol lower. 

    In euros, one market participant put today’s gains down to a few possible factors, “Supply has been taken down pretty well and used as an opportunity to cut some shorts. There’s probably also some covering ahead of the US CPI data tomorrow,” he added. “Positioning is probably a major factor,” he suggested. 

    At the same time, he noted that dealers hedging large swapped issuance would also be buyers of futures. Meanwhile, the new issue pipeline remains robust with several banks in the mix across the 5y to 10y sector including Credit Agricole, Commerzbank and BBVA, plus benchmark SSA deals from MuniFin and EDC in 5y, and the World Bank in 10y.


    In euro swaps, one recent theme has been outperformance of the 5y sector with the 2s/5s/10s swap fly continuing to richen and last marked around -29.5bps at multi-year lows. "You'd think there might be come hedge fund interest (to fade), but then considering we continue to richen it doesn't look that way," pointed out one source.


    Across the swap curve, last prices were 2s/5s at -36bps (-4.25bp), 5s/10s at -6.5bps (-2.25bp) and 10s/30s at -58.25bps (+1.25bp). After narrowing over the last couple of days, 5y asset swaps are a touch tighter again at 63.3bps and relatively steady at 61.0bps in 10y. 


    EUR 10s/30s steepening bias - JPM
    In research published the end of last week, strategists at JP Morgan hold a medium-term steepening bias on EUR 10s/30s with the bank finding it too flat vs long-term fundamental drivers. It writes:

      “We have a medium-term bullish duration bias on blue yields which is supportive of further steepening of the curve. In our view, a rally in yields is the primary structural factor responsible for steepening of the 10s/30s curve. This dynamic is expected to more than offset any impact coming from pension fund receiving flows at the ultra-long end of the curve… Overall, our 10s/30s steepening bias is primarily driven by bullish duration bias as we approach the end of the hiking cycle and market focusses on transitioning to an easing cycle leading to lower blue yields.”


    New issues

  • CNP Assurances is pricing €500m (max) 30.5y NC10.5 Sustainable Tier 2 around swaps +270bps through BNPP, CA (B&D), GS, JPM and Natixis.

  • World Bank is pricing EUR 10y SDB at swaps +11bps through BNPP, DB, Natixis and Nomura. Latest order book size reported to be above €2.7bn excluding lead interest.

  • Credit Agricole is pricing EUR 10y around swaps +140bps through CA (B&D).

  • Elia Transmission Belgium is pricing €500m (max) 10y Green around swaps +125bps through Belfius, BNPP, ING and NatWest (B&D).

  • Thames Water, a UK company, is pricing EUR Green 4.25y around swaps +140bps and 8y around swaps +180bps. Leads are Barclays, HSBC (B&D) and SMBC Nikko.

  • Commerzbank is pricing EUR 7y NC6 SNP around swaps +270bps through Commerzbank (B&D), DB, ING, Natixis and UniCredit.

  • Agence France Locale is pricing EUR long 7y around OATs +57bps through Citi, Commerzbank, JPM and SocGen.

  • NordLB is pricing €500m long 7y Covered around swaps +15bps through CA, DZ (B&D), Erste, Helaba, ING and NordLB.

  • State of Saarland is pricing €500m (max) 7y at swaps -3bps through Deka, DZ (B&D), HSBC, LBBW and NordLB.

  • MassMutual, a US insurer, is pricing €500m 7y around swaps +105bps through Barclays, BNPP, CS and JPM (B&D).

  • HIT SA is pricing €500m (max) long 7y around swaps +200bps through Sabadell, BBVA, BNPP, Caixa, CA, IMI, Mediobanca, Mizuho (B&D), MUFG, Natixis, SocGen and UniCredit.

  • SocGen is pricing EUR perp NC6.5 AT1 around 8.275% through itself.

  • Export Development Canada is pricing EUR 5y around swaps +1bps through BNPP, DB, HSBC, NatWest and TD.

  • MuniFin is pricing EUR 5y around swaps +1bps through BofA, JPM, MS and Nordea.

  • Pirelli is pricing EUR 5y SLB around swaps +190bps through BNPP, BofA, Barclays, DB, IMI, Mizuho and UniCredit.

  • SFIL is pricing EUR 5y around OATs +47bps through BNPP, JPM, Natixis (B&D) and NatWest.

  • BBVA is pricing EUR 4.5y Covered around swaps +32bps through BBVA (B&D), Commerzbank, Helaba, HSBC and Natixis.

  • Banco BPM is pricing EUR 4y Green around swaps +230bps through Barclays, CA, DB, JPM, NatWest and SocGen.

  • RLB Steiermark is pricing €500m (max) 4y Covered around swaps +25bps through BayernLB, Commerzbank, Erste (B&D), LBBW and RBI.

  • Lansforsakringar Bank is pricing €500m 4y Green around swaps +140bps through Commerzbank, Danske, HSBC, NatWest and UBS.

  • UniCredit Austria plans to sell EUR long 3y Covered through BayernLB, Erste, HSBC, ING, Natixis and UniCredit.

  • ANZ Bank is pricing EUR 3y around swaps +75bps through ANZ, DB, HSBC, SocGen and UBS.