EUR Swaps: All eyes on CPI; Fly still richening; Long-end steepens

Line chart 25 Mar 2021
All eyes are on the US CPI data. Meanwhile the 2s/5s/10s fly continues to richen while 10s/30s steepens.

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  • All eyes on US CPI data
  • New issues

    All eyes on US CPI data
    All eyes on are US CPI data with some sources expecting a print slightly below the Bloomberg consensus of 6.5%yoy, down from 7.1% the previous month. “The risks seem to be something on the lower side and would partly explain the rally we’ve seen in recent days,” felt one euro trader.

    In the meantime, the 10y Bund future was last up 60 ticks while the 10y yield was 4bps lower at 2.16%. Yesterday came reports that Germany’s SPD favours a joint EU industrial strategy, raising speculation of more joint EU issuance. After significant tightening yesterday, today has seen the 10y BTP/Bund spread tighten another 2bps to 179bps last.

    Elsewhere, the pace of new issuance has slowed although a few banks remain active across the 5y to 10y sector. Swap spreads are mixed with the Bobl ASW still underperforming, last 1.1bp tighter at 62.5bps and around 5bps narrower since the start of this week.

    In swaps, the 5y sector continues to outperform with the 2s/5s/10s fly richening to around -32.25bps as the curve bull flattens with last prices putting 2s/5s at -38.75bp (-1.75bp) and 5s/10s at -6.5bps (-1.75bp). Note that sources speaking yesterday said hedge fund interest to fade the fly had so far appeared limited. 

    Further out, 10s/30s has steepened up a touch and was last marked at -55.5bps (+1.5bp). To recap, some accounts have been eyeing 10s/30s steepeners based on fundamental drivers as the end of the hiking cycle nears. At the same time, asset swap demand for new issues has been reported, such as the EFSF 10y issue earlier this week that offered a few bps pick-up over swaps.


    New issues

  • KommuneKredit is pricing €500m (max) 12y around swaps +21bps through BNPP, Citi, Danske and JPM.

  • Autoroutes du Sud is pricing EUR 10y around swaps +90bps through BNPP (B&D), Natixis, DB, ING, MS, MUFG and Santander.

  • Rabobank is pricing EUR 10y Covered around swaps +23bps through BNPP, Commerzbank, CS, LBBW, NatWest and Rabobank.

  • AFD is pricing EUR 7y Sustainable around OATs +53bps through Barclays, BNPP, BofA, Citi and SocGen.

  • Deutsche PBB is pricing €500m (max) 6y Covered around swaps +16bps through BNPP, CA (B&D), CS, DZ and LBBW.

  • Accra Banca is pricing EUR 5y NC4 Social around 7.125% through BNPP, GS, IMI (B&D), Mediobanca and Santander.

  • Banca IFIS is pricing €300m 4y around 6.25% through CA, MS (B&D), Santander and UniCredit.

  • UniCredit Bank Austria is pricing EuR long 3y Covered at swaps +17bps through BayernLB, Erste, HSBC, ING, Natixis and UniCredit (B&D).

  • Raiffeisenbank is pricing €500m 3y NC2 Sustainable SNP around 7.5% through BNPP, Citi and RBI (B&D).

  • TD Bank is pricing EUR 2y FRN around 3mE +60bps through Barclays, Commerzbank, Natixis, SocGen and TD (B&D).