EUR Swaps: EU €5bn 30y tap; ASW demand?

ECB EUR sign
The standout deal today has been the EU's €5bn tap of 30y bonds.

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  • EU €5bn 30y tap; ASW demand?
  • Money market flatteners - JPM
  • New issues

    EU €5bn 30y tap: ASW demand?
    The standout deal today has been the European Union’s €5bn tap of 30y bonds at swaps +86bps. The latest order book size was reported to be above €51.9bn including interest from the lead managers BNP Paribas, JP Morgan (B&D), NatWest, Nomura and UniCredit.

    In the market, the EUR 10s/30s swap curve has flattened a touch and was last -0.5bp at -52bps. “The lead manager seems to be doing a pretty good job. They’re a big US bank and know what they’re doing,” said one dealer away from the leads. "We're also seeing 30y Dutch supply. All this (supply) has helped Bunds to hold firm as part of the hedging process. But this afternoon we could see a bit more steepening," he reckoned. 

    Meanwhile, traders have been contemplating how much, if any, asset swap demand there could be for the 30y deal. “It’s not a traditional maturity for asset swap interest, but at around 80bps pick-up then you would expect some reasonable interest,” reckoned one dealer. "Any market impact on asset swap spreads will likely come from investors, who will largely be buying on ASW. This provides some balance to other client flows from those still interested in receiving ASWs," he said.

    Long-dated Bund ASWs are slightly wider with the Buxl vs 6m at 28.9bps (+0.6bp) and Buxl vs €STR around 20.1bp (+0.1bp). More generally, swap spreads across the curve have widened over the past two sessions. Strategists at Commerzbank today suggested that, “As risk sentiment remains resilient, speculation about lower availability of collateral over Lunar New Year may be at play.”

    Elsewhere, in latest data, Euro PMIs printed higher than the Bloomberg consensus with Manufacturing at 48.8 vs 48.5 and Services at 50.7 vs 50.1.

    The 10y Bund future is trading near unchanged while the 10y yield was marked around 2.185% (-1.5bp). Likewise, Euribors are also close to flat on the day with whites up to 1bp higher while reds are down by 0.5bp to 1bp.


    Money market flatteners - JP Morgan
    In its weekly rates research JP Morgan expects 50bps hikes at the February and March meeting followed by a slow down to 25bps in May. Overall the bank states it continues to favour money market flatteners. It writes:

    • “In a scenario where the ECB has to take policy rates well above current pricing (and our
      baseline forecast), they would like to do so at a rapid pace by continuing to deliver further 50bp hikes over the coming meetings. A side-effect of this rapid pace of tightening would be a quicker and transition to a more aggressive easing cycle.

    • “This should support further flattening of the money market curves. In a scenario where medium-term recessionary fears exacerbate, we would also expect further flattening of the money market as the front-end remains relatively sticky over the near-term given ECB is not yet done with its hiking cycle and some uncertainty remains on how high will they go.”


    New issues

  • European Union is tapping €5bn 3.0% Mar 2053 at swaps +86bps. Latest order book size reported to be above €51.9bn including lead interest via BNPP, JPM (B&D), NatWest, Nomura and UniCredit.

  • Ile de France Mobilites plans to sell EUR Green 10y and 20y bonds through BNPP, CA, HSBC and Natixis.

  • BNP Paribas Home Loan SFH is pricing €1bn 7y Covered at swaps +22bps through ABN Amro, BBVA, BNPP, Caixa, Commerzbank, Erste, RBI and Swedbank.

  • TDC NET, a Danish telecoms group, plans to sell EUR 7y SLB later this week through Barclays and BNPP.

  • Red Electrica SA is pricing €500m (max) perp NC5.5 Green hybrid around 5.375% through BNPP (B&D), Citi, Barclays, BBVA, Caixa, ING, Mediobanca and Santander.

  • Commerzbank is pricing €1bn 3.25y Covered at swaps -3bps through BayernLB, Commerzbank, Erste, Helaba, Santander and TD.

  • Tatra Bank plans €500m (max) 3y Covered through Commerzbank, ING and Raiffeisen.

  • RLB Oberoesterreich is pricing €750m 3y Covered at swaps +18bps through CA, Erste, ING, LBBW and RBI.

  • Oldenburgische Landesbank is pricing €300m (min) 3y around swaps +280bps through Barclays, BNPP, DB, GS and UniCredit.