EUR Swaps: Supply endgame; ASW ranges played

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Dealers contemplate that the big euro supply calendar could be nearing its endgame.

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  • Supply endgame; ASW ranges played
  • Receive Mar ECB €STR - RBC
  • New issues

    Supply endgame; ASW ranges played
    Global fixed income has been in retreat today with the 10y Bund future last down by 50 ticks and the 10y Bund yield up 2.75bps at 2.185%.

    “The big supply calendar appears to be nearing the end now that the EU and Spanish deals are out of the way,” said one dealer.

    Earlier, Finland issued €3bn 15y at swaps +15bps through Barclays, BofA, Danske, GS and JPM (B&D). One trader away from the leads was unsure whether the Finland deal would be swapped, while on the other side he noted there could be asset swap demand.

    Meanwhile, Bund asset swap spreads are slightly tighter across most of the curve today after widening the past couple of sessions. “Most likely fast money is playing the range,” said one trader, suggesting some accounts could already be closing out recent widening positions.

    Last prices were Schatz at 70.8bps (unch), Bobl at 66.7bps (-0.9bp), Bund at 64.1bps (-1.4bp) and Buxl at 29.8bps (-0.9bp).

    Across the swap curve, the short-end is near unchanged with whites up to 0.5bp higher while reds are up to 1bp lower. Further out, the direction was mixed and little changed 2s/5s at -36.25bps (+0.75bp), 5s/10s at -6.25bps (-0.5bp) and 10s/30s at -50bps (+0.25bp).

    Receive Mar ECB €STR - RBC
    In a strategy note published today RBC recommends receiving March ECB €STR at 2.83% with a target of 2.70%. The bank writes:

    • “The key to the ECB meeting is not what the concrete action will be in February but which take-away the market can price for subsequent meetings. At present, the March ESTR forward implies approximately 43-44bp of rate hikes which translates into around 70-75% odds for a 50bp step in March again.

    • “We think the risk/reward argues for long positions in this tenor. If the ECB guides markets that another 50bp step is coming, the downside is limited to a maximum of 7bp – in reality probably a bit less than that as there must still be a chance that circumstances change until the actual meeting.

    • “If, on the other hand, markets can take away that a 25bp step is plausible, the trade should make money. In extremis, if holding until March and indeed a 25bp step is delivered, the upside should be around 18-19bp. We thus add a tactical long (with ‘high conviction’) to our trade portfolio.”


    New issues

  • Finland is pricing €3bn 15y at swaps +10bps through Barclays, BofA, Danske, GS and JPM (B&D). Latest order book size reported to be above €11bn including lead interest.

  • Helaba is pricing €750m 7y Green SNP at swaps +125bps through CA, DZ, Helaba (B&D), ING, NatWest and UBS.

  • Bpifrance is pricing €1bn long 6y at OATs +45bps through Barclays, BNPP, BofA, Citi and SocGen.

  • Marex Group, a UK-based broker, is pricing €300m 5y around 8.5% through GS and HSBC.

  • ZF Finance is pricing €650m 3.5y Green at 5.875% through BNPP, Commerzbank, DB (B&D) and Santander.

  • Lloyds Bank is pricing €1bn 3y Covered at swaps +24bps through Lloyds (B&D), ABN Amro, BNPP, LBBW and Natixis.