USD Swaps: CS feels the heat; PPI drops; USTs soar

CS feels the heat; PPI drops; USTs soar  

Treasuries have rallied hard as price action is unhinged. A lower PPI print alongside with pressures on European banking shares have pulled the 2y note yield to 3.79% (45bps lower) while the 10y note yield is last 3.42% (26bps lower).

As for economic data, PPI came in much lower than expected (-0.1% m-o-m/4.6% y-o-y versus forecast +0.3%/5.4%) while ex-food and energy also dropped (0% m-o-m/4.4% y-o-y versus forecast +0.4%/5.2%). Empire Manufacturing also plunged -24.6 (vs. expected -7.9) while retail sales were closer to forecast at -0.4%/ex-auto -0.1%).

Meanwhile, shares of Credit Suisse have cratered (last -22.7%) while other European banking stocks have also faltered (BNP Paribas -10.8%, Barclays -7.75%, Deutsche -8%). For more, please see Total Derivatives. Stateside, the KBW Banking index is last down 4.4% while the broader domestic equity indexes are under pressure (DJIA -1.5%, S&P -1.51% and Nasdaq -1.06%). Mid-size regional banking shares are lower (First Republic -12.4%, Zions -3.7%).

Elsewhere, swap spreads have careened back in lower in the front end they remain highly attenuated to the underlying moves in yields amid hedging needs from options desks alongside of banking portfolios and other duration demand. Overall volumes are high. Belly spreads are a touch wider, while the long end is lower. led by the illiquid 20y. Meanwhile, the IG new issuance market is shuttered due to the ongoing high volatility. 

2s -9.25bps (-5.25bps), 3s -17.875bps (-3.75bps), 5s -19.75bps (+0.5bps), 7s -27bps (+1bps), 10s -23.875bps (+0.25bps), 20s -62.75bps (-3bps), 30s -69.875bps (-1.25bps).

Formosas and zero-coupon callables

• Goldman Sachs sold a $10m 10y NC1 zero coupon callable (non-Formosa). The EMTN matures Mar 2033 and is callable annually starting Mar 2024. Self-led. Estimated IRR 6.55%. Announced Mar 15.

   

• ING Bank sold a $10m 10y NC2 zero coupon callable (non-Formosa). The EMTN matures Mar 2033 and is callable annually starting Mar 2025. Lead N/A. Estimated IRR 6.04%. Announced Mar 15.

   

• Nordic Investment Bank sold a $80m 20y NC6 zero coupon callable (non-Formosa). The EMTN matures Mar 2043 and is callable Mar 2029. Lead Deutsche. Estimated IRR 4.901%. Announced Mar 15.

   

• Merrill Lynch sold a $35m floating Formosa. The EMTN matures Mar 2033 and is non-callable and pays a coupon of 1y ICE SOFR +165bps. Announced Mar 14.