USD Swaps: Steepening back in modest proportions; 3y messy

Chart line 30 Jan 2023
USTs hurdled Powell remarks and a messy 3y auction, with the curve steepening out. IG supply saw a hefty slug, led by Intel's $11bn 7-part.

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  • Steepening back in modest proportions; 3y messy

  • New issues


    Steepening back in modest proportions; 3y messy

    Treasuries are back to more pedestrian price action with yields up to 3.8bps higher, led by the back end, as the violent selloff in reaction to the NFP has faded. The 10y note yield is last 4.1bps higher at 3.685% while 2s10s is last 4.5bps steeper at -80.3bps while 5s30s widened 2.7bps to -12.7bps. Equities ended higher (DJIA +0.78%, S&P +1.57% and Nasdaq +1.90%).


    As for Powell, the crux of his remarks remained more or less status quo, sources judged, as he stated “I think we are going to need to do further rate increases” in reaction to the “extraordinarily strong” labor markets.  


    Meanwhile, the $40bn 3y auction was a messy affair, coming with a large 3.8bps tail and drawing a rate of 4.035%. Unlike the previous set of auctions (2y, 5y and 7y), indirects did not show up and dropped to 59.1% and while directs rose to 21.1%, primary dealers were left with a higher 19.9% allocation. The bid-to-cover of 2.33x was the lowest since Nov 2021.


    Swap spreads stayed lower the belly of the curve that saw heavy swapped issuance receiving from SSAs - though spreads generally widened out from the morning’s issuance-related narrows amid mostly higher than average volumes. On the supply side. overall IG issuance totaled $14.7bn (ex-SSA) while SSAs alone accounted for a hefty $13.7bn.


    Currently, SOFR swaps 2s +1.5bps (+0.25bps), 3s -9.25bps (+1.75bps), 5s -21.5bps (-0.25bps), 7s -30.625bps (-0.125bps), 10s -30bps (+0.125bps), 20s -58bps (+0.375bps), 30s -65.125bps (+0.5bps).



    New issues


    • IDB Invest (Aa1/AA+) is preparing a USD 5y Global in the region of swaps +59bps. Leads are BNPP, Citi, GS and JPM. Expected to price tomorrow.


    • Intel (A2/A) launched an $11bn 7-part ($1.5bn 3y, $1.75bn 5y, $1.25bn 7y, $2.25bn 10y, $1bn 20y, $2bn 30y and $1.25bn 40y). Leads BofA, Citi, JPM and MS. +75bps, +105bps, +135bps, +155bps, +175bps, +195bps, +215bps.


    • Export Development Bank of Canada launched a $3.5bn 5y Global at swaps +39bps. Leads are BMO, CIBC, GS and MS.


    • Vodafone PLC (Baa2/BBB) priced a $1.2bn 2-part ($700m 30y and $500m 40y). Leads BofA, Citi, GS, SMBC and TorDom. +195bps and +210bps.


    • Starbucks priced a $1.5bn 2-part ($1bn 3y and $500m 10y). Leads BofA, Citi, GS and MS.  Baa1/BBB+.  +68bps, +115bp.


    • Comcast priced $1bn 10y. Leads BofA, ACADSE, SIEWIL, SAMRCO and LOOPCM. A3/A-/A-. +100bps.


    • The EIB priced $5bn 10y Climate Awareness Bond at swaps +48bps via BNPP, CIBC and Citi (B&D).


    • Swedish Export Credit priced a $1.75bn 3y Global at swaps +46bps via Citi, Daiwa, HSBC and JPM.


    • Caisse de Depot et Placement du Quebec (CDP Financial) priced a $2bn 3y at swaps +58bps via Barclays, BMO, BofA and RBC.


    • The World Bank priced a $5bn 7y Sustainability Global via BofA, Barclays, HSBC and JPM. Swaps +47bps.