Basis: Thinning pre-CBs; But cable off-message

Dinosaurs 23 Oct 2020


  • Thinning pre-CBs; But cable off-message; Massive IBM

  • Flow

  • New issues


Thinning pre-CBs; But cable off-message; Massive IBM

After a Monday session that was characterized by a return to life after the China holiday last week, as well as by cross-curve moves in basis driven by renowned office computer trailblazer IBM, today saw a slight slowdown in cross-currency swap action ahead of what some say could be a season-defining week of central bank marker-laying.


Fixed income markets including government bonds and basis, have mostly traded during this first month of 2023 in a refreshingly ordered, relatively tight-ranged manner that has proved a soothing contrast to the Autumn madness of 2022.


But traders are perhaps getting restless for a theme.1967, for example, is remembered for its Summer of Love, 1979 for ‘Crisis, What Crisis’ (the quote from PM Callaghan, not the 1975 Supertramp album), and 2004 will be forever venerated as the year Arsenal finished its unbeaten Premiership season.


So what of 2023? Will it be the year of the big bounce after prior turmoil, or the year when a combination of Putin and overly-conservative central bankers sent Western economies into prolonged retreat.    


Some feel this week’s comments from the Fed, ECB and, to a lesser extent, the BOE might offer a first clue as to where this pivotal year may take us, so there is reason for pause today.


One swapper summed up activity in their market as quiet, despite decent single-border issuance, saying that “the three central banks are keeping it a bit thin. Apart from IBM the main thing you can say about this week is that GBP remains firmly open as an issuance market.”


Looking first at IBM which in addition to a $3.25bn USD four-tranche issue yesterday stormed across the Atlantic with a €4.25bn, 4y, 8y, 12y and 20y bond plus a £750m 15y deal just for luck.


The above long-suffering basis swapper said that “the IBM deal was the biggest the (cross-currency basis) market has seen in a while.” Looking specifically at the whopping EUR segment, he said that “there was a concession (in the basis market) but it was taken down well. There was some movement (in EUR/USD basis) but it wasn’t bad at all. It shows that the EUR/USD market can cope well with volume.”


He said it was hard to note on particular point of lumpy flow or pricing pressure given the spread of maturities across the curve but noted that “four year, 8y, 12y and 20y all moved down during hedging.” To pluck out the 8y sector as an illustration, it dropped sharply yesterday morning from -23.625bops to -24.5bps, before working its way steadily back up to reach -23.375bps at the time of writing.


So after that defiant roar from the fallen king of the tech jungle things have quietened down a bit in EUR/USD, with the curve largely happy to continue to re-expand by about 0.5bps at most points so far today following its compression by IBM.


Looking at cable, in the wake of GBP deals today from KfW, BpiFfrance and EIB today as well as IBM, AIB and the AIIB yesterday, it’s fair to say GBP issuance isn’t slowing down just yet. The above trader said that despite the pleasing reminder that GBP is part of the grown-up world still, today’s flow in cable basis hasn’t thus far been massive, with some activity in 6y GBP/EUR seen at 4.125bps earlier today as it headed down to 3.75bps a little while ago.



Basis trades on the SDR can be seen here: Total Derivatives SDR Note that the SDR now shows platform/broker/SEF for the trade.


New issues


USD new issues:

  • Korea Housing Finance (Aa2/AA) is preparing USD 3y and/or 5y Social bonds after meeting investors from Feb 7. Leads are Citi, CA, HSBC, JPM, SocGen and StanChart.


  • Bank of New Zealand yesterday priced an $850m 5y at Treasuries +118bps via Citi, JPM, NAB, Lendlease Corp and RBC.


EUR new issues:

  • Swedish shipper Stena is pricing €325m 5y NC2 around 8% through JPM (B&D), BNPP, Citi and Nordea.


GBP new issues:

  • Bpifrance has priced a £250m, Jan 2026 bond at gilts +934bps via Barclays, HSBC and NatWest.  

  • KfW today priced a £500m, 3.75%, July 2027 bond at gilts +57bps via BofA, Deutsche and TorDom.


  • The Asian Development Bank yesterday priced a £600m, Feb 2026 bond at gilts +74bps via BMO, Deutsche and TorDom.


  • The EIB today gave birth to a tiny but perfectly-formed £50m, Feb 2025, SONIA +12bps 'Digital' FRN. In attendance were BNPP, HSBC and RBC.  


  • The AIIB yesterday priced a £250m tap of its 4.375% Jun 2026 bond at gilts +100bps via MS.


  • IBM yesterday priced a £750m 15y bond at gilts +115bps as part of a five-tranche bond issue consisting of €4.25bn in 4y, 8y, 12y and 20y EUR supply, plus the GBP tranche via Barclays, BofA, Citi, Goldman (B&D), JPM, Mizuho, MUFG and TorDom.


  • Kommunalbanken on Friday priced a £50m tap of its Dec 2025, 0.25% bond via Nomura.