USD Swaps: Yields spill higher; Powell testimony looms; IG supply tops $46bn

Chart numbers 14 Jun 2022
Yields stayed near the intraday highs, with the belly leading the selloff. Swap spreads stayed close to home despite decent FIG and SSA supply.

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  • Yields spill higher; Powell testimony looms; IG tops $46bn

  • New issues


    Yields spill higher; Powell testimony looms; IG supply tops $46bn

    Treasury yields are 0.5 to 7bps higher at the close, with the 7y and 10y leading the selloff. The 10y note yield is last 4.064% (7bps higher) while 2s10s is last 6.6bps steeper at -82.4bps and 5s30s 0.5bps lower at -30.5bps. Equities closed near the highs of the day, with a late afternoon push higher (DJIA +1.05%, S&P +0.71% and Nasdaq +0.73%).


    Atlanta Fed President Bostic (non-voter) chimed in again for the second time this week, saying today “There is a case to be made that we need to go higher” as “jobs have come in stronger than we expected. Inflation is remaining stubborn at elevated levels. Consumer spending is strong. Labor markets remain quite tight.”


    Meanwhile, a source believed that the market is gearing up for the semi-annual testimony (still referred to as Humphrey Hawkins) by Powell that starts next Tuesday in front of the Senate and then the House on Wednesday. The source reckoned that the market will be looking closely to see if Powell makes any changes in his tune at all after the string of recent higher inflation data.


    Still, the source argued that inflation readings “take time to show the effects of the tightening” monetary policy and a lot of data shows a softer economy in "Non-farm productivity, manufacturing and car sales," for example. Thus, the trader believed that should the 10y note yield hit a target of 4.25% - that many increasingly see as the level to watch for -  then it may be a “buying opportunity.”


    Elsewhere, swap spreads were relatively stable despite a large $7bn HSBC 3-part pricing and a couple SSAs (EBRD and L-Bank). For the week, IG supply (ex-SSA) has exceeded expectations with $46.3bn priced, with today’s tally adding $9.2bn.  In Treasury refunding, the Treasury announced it will sell $40bn 3y Tuesday, followed by a $32bn reopening of the 10y Wednesday, and $18bn 30y reopening Thursday, as had been expected.


    5bps (-1.25bps), 3s -5.5bps (unch), 5s -18.5bps (+0.25bps), 7s -29.75bps (+0.125bps), 10s -26.375bps (+0.125bps), 20s -61bps (+0.25bps), 30s -67bps (+0.125bps).



    New issues


    • HSBC launched a $7bn 3-part TLAC ($2bn 6y NC5, $2.25bn 11y NC10 and $2.75bn 21y NC20). Self-led. A3/A-/ A+. +185bps, +220bps and +210bps.


    • Norinchukin Bank priced a $500m 5y Green bond. Leads Citi and JPM (B&D). A1/A-. +110bps.


    • Black Hills priced a $350m 5y. Leads BofA and JPM.  Baa2/BBB+/BBB+. +170bps.


    • NRG priced a $740m 10y. Leads Citi, GS, MS, MUFG and BofA.  Baa3/BBB-/BBB-.  +310bps.


    • Northwest Natural Gas priced a $100m 10y FMB. Leads RBC and USB.  A2/AA-.  +170bps.


    • Verisk priced a $500m 10y. Leads BofA and HSBC. Baa2/BBB/BBB+. +180bps.  


    • EBRD priced a $2bn 5y Global. Leads Daiwa, GS, JPM and TorDom. Mid swaps +31bps.


    • L-Bank priced a $2bn 3y. Leads BMO, DB, JPM (B&D) and RBC. Mid swaps +20.8bps.