Basis: Bank of England, English banks, dominate dollars

Bank of england 18 Oct 2021
A busy session in the cross-currency basis market has seen interest in USD supply ramp up exponentially this week, especially from the City of London.

Start a free trial to read this article

Join today to access all  Total Derivatives content and breaking news. Already a subscriber? Please Log In to continue reading.

Or contact our Sales Team to discuss subscription options.

Get in Touch
Blurred image of Total Derivatives article content


  • Bank of England, English banks, dominate dollars

  • Flows

  • New issues


Bank of England, English banks, dominate dollars

A busy old session in the cross-currency basis market has seen interest in USD supply ramp up exponentially this week, with a very busy Monday being followed by a rush for USD from UK issuers.


Most prominent (certainly from a UK-centric perspective) is the Bank of England’s $2bn 3y bond issue which is set to price soon at USTs +13bps, while around this are quite lumpy and imminent deals from HSBC, NatWest and Lloyds, mostly centred in the 5y area with the exception of a planned NatWest tranche in 10y.  


Asked why this flurry of issuance on Wall Street direct from the Square Mile (and Canary Wharf), one seasoned basis swapper said, “Well firstly it’s probably a mistake to bracket the BOE deal as a basis-driven bond. They do the same thing every year and to the best of my knowledge they don’t swap it back to GBP.”


As for those other issues (of which only Lloyds has currently priced, in a £1.25bn, 6yNC5 deal last night), he said that, “Yesterday the market there just opened up… There were seventeen deals worth about $19bn and it’s going again.” He said that while UK banks seem to be forming a very distinct cluster this is likely more a coincidence mixed with good options in cable basis, and is really more of an expression of US demand coming back after a period of slight data-driven volatility in USD fixed income.


Elsewhere, yesterday’s other star performer was probably GBP, where strong domestic issuance from Barclays met with cross-border interest from Ford, Ned Waterschaps and KfW, which probably explains a lack of GBP supply today.


In terms of flow so far today, cable seems unusually well-represented in the long end, with 13y, 17y, 18y and 23y catching the eye as possibly being connected to private placement or other flows, according to another basis swapper, but not to anything in public space.


On the curves, EUR/USD was lower by between 0.125bps and 0.375bps across its curve, while in cable the curve was flatter, with lingering hedging flows propping up the front end where 3y is ++0.375bps and 5y is +0.125bps, while 30y was -0.125bps.


Both markets though are trading decisively in the middle of recent ranges in their longer ends, but the front-end of cable is catching the eye at +3.75bps. That is it’s highest pricing of the post-LIBOR era for the first break, and also the first time it has topped its +2bps level at the start of the Truss mini-era, during which the cable first break fell to -37bps, though a lot of that move was seasonal, rather than Truss-specific.   




Basis trades on the SDR can be seen here: Total Derivatives SDR.




New issues


USD new issues:

  • The Bank of England is close to pricing a $2bn, 3-year bond at USTs +13bps via BofA, Deutsche, RBC and TorDom.


  • SMFG plans a number of taps of existing USD bond issues today including taps of its Jan 2026 benchmark at USTs +125bps or so, its Jan 2028 at +160bps, its Jan 2030 at +175bps and its Jan 2033 at around 190bps. Lead is SMBC Nikko.


  • HSBC plans a USD benchmark Perpetual NCV5.5y Subordinated AT1 bond at around 8.5% via HSBC.


  • NatWest last night priced a $2bn, two tranche bond offering consisting of a $1bn, 4yNC3 at USTs +135bps and a $1bn, 11yNC10 at +210bps via BofA, Goldman, JPM, NatWest, UBS and WFS.  


  • Lloyds Bank last night priced a $1.25bn, 6yNC5 bond at +170bps via Lloyds, Mizuho, MS, TorDom and WFC.


EUR new issues:

  • McDonald’s Corp is pricing €500m 7y around swaps +100bps and €500m 12y around swaps +130bps. Leads are BNPP (B&D), BofA, JPM and SocGen.


  • Morgan Stanley is pricing EUR 6y NC5 around swaps +150bps. Self-led.

  • HSBC Bank Canada is pricing EUR 5y Covered at swaps +32bps through HSBC (B&D), BMO, Commerzbank, CIBC, Danske, Natixis, Rabobank, RBC and Scotia.



GBP new issues:

  • Ford Motor Credit yesterday priced a £500m, 6.86%, Jun 2026 bond issue at gilts +310bps via Barclays, Goldman, HSBC, ICBC, Lloyds and NatWest.


  • Dutch dam-builders Ned Waterschaps yesterday priced a £250m, 4.5% Jun 2025 bond at gilts +84bps via BMO, HSBC and TorDom.


  • KfW yesterday priced a £300m tap of its 1.125% July 2025 bond at gilts +60bps via BofA and RBC.



JPY new issues:

  • Italy’s Intesa Sanpaolo has mandated Mizuho, MS, NatWest and Nomura to lead a benchmark multi-tranche Euroyen bond offering on March 3, following investor meetings. The deal is expected to consist of 2y, 3y, 5y, 7 and 10y legs at TONA swaps plus approximately +100bps, 120bps, 125bps, 145bps and 160bps respectively.