EUR Swaps: ASW buyer talk; BOR/OIS narrower

Line chart 25 Mar 2021
Bund asset swap spreads see buyers while in basis BOR/OIS has narrowed.

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  • ASW buyer talk; BOR/OIS narrower
  • Tactical Schatz ASW narrower - JPM
  • New issues

    ASW buyer talk; BOR/OIS narrower
    Bund asset swap spreads have traded “pretty resiliently” as more new issuance hits the screens including several non-euro names. “It seems some is being bought on asset swap,” said one trader.

    At the same time, he was not ruling out the possibility that Belgium’s €5bn 30y could be seeing buyers on asset swap. The deal is being priced at OLOs +8bps through BNPP, DB, JPM (B&D), MS and Nomura. The latest order book size is reported to be above €34bn including lead interest.

    Last spread prices vs 6s were Schatz at 66.8bps (+0.9bp), Bobl at 63.0bps (+0.1bp), Bund at 59.6bps (+0.6bp) and Buxl at 27.0bps (+1.1bp).

    In basis, BOR/OIS, has narrowed led by the 5y sector and down by -0.7bp at 12.2bps. “Recently, some fast money accounts have been buying asset swap spreads vs €STR,” one trader observed. Elsewhere in basis, 3s6s has edged +0.1bp to +0.2bp wider across the curve.

    In swaps, the curve was little changed with last prices 2s/5s at -39bps (-1bp), 5s/10s at -12bps (unch) and 10s/30s at -53.25bps (0.5bp).

    The Bund future was last trading near unchanged around 135.21 and the 10y Bund yield marked around 2.445% (unch). Ahead, US retail sales data at 14:30 CET is seen as the near-term cue for the market.


    Tactical Schatz ASW narrower - JPM
    In its most recent rates weekly JP Morgan holds a tactical narrowing bias in the Schatz swap spread. The bank writes:

    • “The Schatz swap spread narrowed after the ECB announcement but rewidened afterwards and is now marginally too wide in our long-term model versus funding rates, intra-EMU spreads and short-end volatility, and also too wide in short-term regression vs funding rates.

    • “We turn to a tactical narrowing bias over the short term on expectation of further cheapening of funding rates as QT starts.

    • “One risk to Schatz spread narrower would come from wider intra-EMU spreads. However, we note that current valuations are already broadly consistent with BTP/Bund about 20-25bp wider than the current level, and not far away from our tactical 1Q23 target, therefore reducing the re widening risk in case of peripheral weakness.”


    New issues

  • ESM has sent a RfP to banks for a new euro deal.

  • Belgium is pricing €5bn around OLOs +8bps through BNPP, DB, JPM (B&D), MS and Nomura. Latest order book size reported to be above €34bn including lead interest.

  • JR East, East Railway Japan, is pricing €500m 20y Green around swaps +150bps through BofA, BNPP (B&D) and Nomura.

  • Siemens is pricing EUR 8.5y around swaps +65bps, 13y around +85bps and 20y around +115bps. Leads are CA (B&D), RBC, Santander, Standard Chartered, SEB and UBS.

  • Slovak Republic is pricing EUR 12y around swaps +80bps and 20y around +120bps. Leads are Barclays and DB (B&D).

  • Mizuho is pricing EUR 5.25y around swaps +120bps and EUR 10.25y around swaps +155bps. Led by Mizuho (B&D), Barclays, BNPP, Natixis and BBVA.

  • BGK is pricing EUR 10y around swaps +225bps through BNPP, Citi (B&D), Commerzbank, JPM and SocGen.

  • Wuestenrot Bausparkasse is pricing €500m 7y Covered at swaps +14bps through Commerzbank, DZ, Helaba, LBBW and UniCredit (B&D).

  • Oberbank AG is pricing €250m long 7y Covered at swaps +33bps through Commerzbank, Erste, Helaba and RBI (B&D).

  • Munifin is pricing €1bn long 5y Green at swaps -3bps through CA, Danske, HSBC and NatWest.

  • Japan Finance Organization, JFO, is pricing €500m (max) 5y Green at swaps +33bps through JPM, Barclays (B&D), BNPP and Mizuho.

  • Raiffeisenverband Salzburg plans EUR sub-benchmark 5y Covered through DZ, Erste and Raiffeisen.

  • Credit Suisse London is pricing EUR 3.5y around swaps +250bps through Credit Suisse.