Swap spreads re-widen; 3s6s higher
The Bund has rallied over a point today, putting a halt to the sell-off that occurred during the previous four sessions. “Well, we cannot selloff every day,” pointed out one trader when asked about the driver behind today’s rally. “On the one hand we are quite rangebound, but we are also getting used to some of these outsized intraday moves as well,” he felt. The 10y yield was last marked -8.5bps at 2.27%.
One of the biggest movers earlier this week was tightening in Bund asset swaps after the ECB’s surprise announcement. Today spreads have widened across the curve with last prices Schatz at 69.0bps (+3.2bps), Bobl at 62.3bps (+1.0bp), Bund at 58.4bps (+0.9bp) and Buxl at 24.1bps (+0.5bp).
In terms of flow, one trader reckoned there had been a mix of interest in swap spreads, “Some accounts have been looking at medium-term tighteners but that has been met with good two-way interest,” he said.
In basis, €STR-BOR has retreated after widening at the start of the week. For example, 5y was marked -0.4bp at 13.0bps.
Elsewhere in basis, 3s6s has edged higher, “A few banks have been bidding it,” said one dealer. Meanwhile, note that several banks are pricing new issues in euros today including DNB Bank €1bn 4y NC3, L-Bank €1.25bn 5y, UniCredit €1bn 6y NC5 and BPCE €1.5bn long 6y. On the screens, EUR 5y 3s6s basis was last marked +0.2bp at 7.1bps-mid.
Danish pension fund ATP reports challenging year
Danish pension fund ATP Group today described 2022 as a “historically challenging” and “unusual” year amid steep interest rate hikes and major stock market declines.
The fund reported a loss of DKK -56.8bn driven by large negative returns in its investment portfolio due to “losses in both equities and particularly bonds.” ATP goes on to state that it plans to stick with its current investment approach and views it as the correct long-term strategy. It also stresses there will be no changes to pensions paid out already promised to members.
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