USD Swaps: Wings lead UST selloff; Spreads narrow amid busy IG supply

USTs yields ended modestly higher, with the wings underperforming. Swap spread narrowed as nearly $14bn priced in IG. Citi examines SSA trends.

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  • Wings lead UST selloff; Spreads narrow amid busy IG supply

  • New issues


    Wings lead UST selloff; Spreads narrow amid busy IG supply

    Treasuries slid lower this afternoon. The 10y note yield last 1.5bps higher at 3.976% while 5s30s is 1.6bps steeper at -35.4bps and 2s10s is 0.7bps flatter at -91.7bps. Equities closed with modest gains/losses (DJIA+0.12%, S&P +0.07% and Nasdaq -0.11%). Ahead of Powell’s testimony, the market is on edge for any change in the tone by Powell, and sources note that volatility has kept a bid despite the relatively sedate moves.


    On the supply side, IG new issuance was busy as fifteen issuers piled in to price a total of $16.85bn (ex-SSA) – including Yankee FIG issuance from CBA, Lloyds and Santander. Swap spreads narrowed amid generally higher than average volumes.  Tomorrow begins the Treasury refunding with $40bn 3y notes on deck.


    Focusing on SSA supply trends thus far this year, analysts at Citigroup highlight that USD SSA supply was heavier than the bank’s estimates in the first two months of the year, as supranational banks appeared “to front load” their funding:


      ”With $47bn and $34bn of gross issuance in the first two months of the year, $SSA supply had been heavier than our estimates in both months. YTD, $SSA gross issuance has reached $85bn, close to one third of $268bn – the amount we projected for the entire year of 2023. This is $29bn higher than the gross issuance at the same time last year, and $9bn higher than the historical average level at this point of the year.”


      “The heavier than usual issuance in 2023 YTD was mainly driven by supranational banks. The… supply from global supranational banks has exceeded the historical average pace so far this year, and tracks closely to the issuance in 2021. However, we expect this supply trend to slow down in the near term for following reasons: Issuance in March tends to be lighter than in the first two months of the year historically. Funding targets of several major supranational banks this year are lower than 2021.”


    Citigroup notes that the 5-year area “continues to be the most popular tenor for new issuance in 2023” and going forward, Citigroup believes that the slowdown in supra issuances could reduce the supply in the 5y to 10y area and “proportionally increase the supply in shorter tenors.” As several Nordic and EU agencies haven’t tapped in the dollar market so far this year could still issue in Q1, Citigroup notes that “the historical pattern suggests the 3-year area is the most popular tenor for these issuers.”


    2s 8.125bps (-1.625bps), 3s -8.25bps (-1bps), 5s -19.875bps (-1.25bps), 7s -30.25bps (-1bps), 10s -26.75bps (-1bps), 20s -62.75bps (-1.125bps), 30s -67.25bps (-0.75bps).



    New issues

    For a complete review of issuance over the past week, please see USD New Issues.


    • The African Development Bank has mandated Barclays, Credit Agricole, Deutsche, JPM and TorDom to lead a USD 5y Global. Price talk is SOFR +35bps.


    • NIB plans a USD 5y Global. Leads BoA, BMO, Nomura and RBC. Aaa/AAA. Price talk around swaps +33bps. Expected to price tomorrow.


    • Avery Dennison launched an upsized $400m 10y. Baa2/BBB. +183bps. Upsized from $350m.


    • Santander Holdings USA launched a $1bn 6y NC5 fixed to FRN. Leads Barclays, DB, RBC and Santander. Baa3/BBB+/BBB+. +223bps. 


    • Rio Tinto Financial priced a $1.75bn 2-part ($650m 10y and $1.1bn 30y). Leads DB, JPM, Santander and SMBC. A2/A. +105bps and +130bps.  


    • Enbridge priced a $3bn 2-part ($700m 3y NC1 fixed and $2.3bn 10y SLB). Leads JPM, MS, Mizuho, SMBC and TSI. Baa1/BBB+/BBB+. +135bps and +173bps. 


    • Commonwealth Bank of Australia priced a $1.5bn 2-part ($1bn 3y fixed and $500m 3y FRN). Leads BofA, CBA, Citi, Goldman and JPM. Aa3/AA-/A+. +70bps and SOFR +75bps.


    • Lloyds Bank priced a $1.25bn perp NC7 AT1 sub. Leads BofA, Lloyds, MS (B&D), RBC and TorDom.  Baa3/BB-/BBB-. 8%.


    • Avnet priced a $500m 5y. Leads BofA, JPM, Scotia and TSI.  +205bps.


    • San Diego Gas & Electric priced a $800m 30y FMB fixed. Leads WFS, BofA, Barclays, BMO and Mizuho. A1/A/A.  +150bps.  


    • Mastercard priced a $1.5bn 2-part ($750m 5y and $750m 10y). Leads BofA, JPM. Lloyds, PNC and WFS. Aa3/A+. +62.5bps and +87.5bps.


    • Duke Energy Progress priced a $1bn 2-part ($500m 10y and $500m 30y). Leads Barclays, MUFG, PNC, RBCCM and USB. +128bps and +148bps.


    • Advanced Auto Parts priced a $600m 2-part ($300m 3y and $300m 5y). Leads JPM, BofA and TSI. Baa2/BBB-. +130bps and +170bps.


    • Ameriprise priced a $750m 10y. Leads GS, JPM and WFS. A3/A-/A-. +120bps.


    • Warnermedia Holdings priced a $1.5bn 3y NC1 fixed. Leads JPM, Mizuho, WFS. Baa3/BBB-/BBB-. +178bps   


    • Principal Financial priced a $700m 2-part ($400m 10y and $300m 30y). Leads Citi, BofA, HSBC and JPM. Baa1/A-/A-. +140bps and +160bps.


    • Marsh & McLennan priced a $600m 30y. Leads Barclays, HSBC and MS. Baa1/A-/A-. +157bps. 


    • Air Lease Corp priced a $600m 144A Sukuk at USTs +185bps via Bank ABC and Dubai Islamic Bank. BBB/BBB.