USD Vol: ULC levels exceed GFC levels; Bid/offers fly wider
ULC levels exceed GFC levels; Bid/offers fly wider
USTs yields are 13 to 38bps lower, with the front end leading amid the deterioration of market functioning. “Bid offers are wide, if you can find an offer,” noted one trader. The vol surface has flown higher with much of the surface not trading.
The ULC has marked astronomically higher, with very short expiries marked as much as 40-70 normals higher on the day (2.5 to 4.5bp/day) while the highest points on the surface, 1m2y is marked on the screens at 267 annualized (16.8bp/day) – from 150 annualized last Thursday. The ULC is now above the 2007-2008 Great Financial Crisis levels, a source highlighted.
“There is no reason for dealers to hit bids, when they can show an offer 20bps wide and get lifted,” an options trader pointed out. Meanwhile, bid/offers in linear IR swaps is over 1bp wide, sources say – reflecting the impaired market functioning at the most basic level. Meanwhile, the CME saw circuit breakers triggered in some rate markets, CME reported today, causing a pause in the markets for 2 minutes before trading resumed.
Interbank activity has dried up, and trading this morning was in small $25m to $50m lots. This afternoon has seen some activity in ULC, with 3y1y trading at 207bps on a total of $600m (11 normals higher), 1y1y dealt at 160bps on $100m and then 165bps on $150m (around 32 normals higher on the day). 1y5y traded at 580bps (17 normals higher) and 1y10y dealt at 910bps ( 12 normals higher).
Earlier in the day, 5y30y dealt at 3050bps, 1m30y dealt at 640bps, 650bpd and then 660bps, 6m10y traded at 690bos, 700bps and then 710bps, 1m10y traded at 324bps and 330bps and is last marked at around 370bps mid (or 182 annualized – 21 normals higher). Two pieces of 12y25y traded at 3345bps and 3360bps, according to the SDR.
For USD option trades on the SDR see here and for volumes please see here.
New structured notes
For a complete review of USD MTN activity over the past week, please see USD MTNs.
- 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.
- Credit Suisse is working on a self-led inflation-linked note maturing Mar 2025 that pays CPI +3.27%, floored at 3.27%. Eurodollar. Announced Mar 10.
- Goldman Sachs is working on a self-led fixed callable maturing Mar 2028 NC2 that pays 5.75%. Domestic MTN.
- Goldman Sachs is working on a self-led fixed callable maturing Mar 2026 NC1 that pays 5.8%. Domestic MTN.
- Goldman Sachs is working on a self-led fixed callable maturing Mar 2025 NC6m that pays 5.65%. Domestic MTN.
- JPM Morgan is working on a self-led fixed callable maturing Mar 2027 NC1 that pays 5.2%. Domestic MTN.
- JPM Morgan is working on a self-led fixed callable maturing Mar 2026 NC6m that pays 5.15%. Domestic MTN.
- JPM Morgan is working on a self-led fixed callable maturing Mar 2025 NC6m that pays 5.2%. Domestic MTN.
- Bank of America is working on a self-led step-up callable maturing Mar 2030 NC1 that pays 5.5% to Mar 2025, 6% to Mar 2028 and 7% thereafter. Domestic MTN.
- Santander is working on a self-led fixed callable maturing Mar 2026 NC1 that pays 4.5%. EMTN.
- Toronto Dominion is working on a self-led USD extendible with initial maturity Mar 2024 and then extendible to Mar 2025 that pays 5.8%. Domestic MTN.
- Royal Bank of Canada is working on a self-led fixed callable maturing Mar 2030 NC2 that pays 5.65%. GMTN.