USD Swaps: Liquidity improves; IG supply; FOMC decision time

Drought green shoot illiquidity 10 Jun 2021
Sources report better liquidity, but still far from normal. IG supply prices $5.75bn across nine issuers. Swap spreads widened.

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  • Liquidity improves; IG supply; FOMC decision time

  • New issues  


    Liquidity improves; IG supply; FOMC decision time

    Treasuries eased back lower still this afternoon, with the 2y note yield last 21.5bps higher on the day at 4.185% and around 26bps higher from the lows this morning. The 10y note yield is last 3.60% (11.7bps higher) while 2s10s is -8.3bps flatter at -58bps and 5s30s -9bps lower to -1.4bp. Equities ended with decent gains (DJIA +0.91%, S&P +1.43% and Nasdaq +1.5%). First Republic shares closed off the highs of the day (+59.6%) to +29%.


    Signs of better liquidity have been popping up and a source remarked that “liquidity has improved a little bit,” but still remains “not great, of course.” In another sign of markets returning, the IG new issuance markets priced $5.75bn across nine issuers, after seeing two issuers price $1.65bn yesterday.


    Swap spreads generally widened but are off the highs of the day amid above average volumes with exception of the very long end.


    Going into the FOMC meeting tomorrow, the futures market currently is pricing 86.4% of a 25bp hike and 13.6% of no change. In general sources are wary of reading too much into today’s more constructive price action and warn that while the market appeared to be functioning better and calming down, that additional bouts of volatility are possible.


    Meanwhile, the Treasury auctioned off $12bn 20y – the first since the crisis - and it came 0.1bps through versus the 1pm bid side. Indirects dropped (67%) while directs rose slightly to 21%, leaving primary dealers 11.9% - the highest allocation since Oct 2022. The bid-to-cover came a decent 2.53x.


    2s +0.375bps (+1.625bps), 3s -11bps (+1.125bps), 5s -19.125bps (+0.5bps), 7s -27.5bps (+1.5bps), 10s -25.625bps (+0.875bps), 20s -66.375bps (+2bps), 30s -73.5bps (unch).




    New issues


    • Panama launched a $1.8bn 2-part ($800m 2035 tap 6.4% 2/14/35 and a $1bn 31y fixed). Leads GS and Scotia.  +255bps and +312.5bps. Total outstanding on the 6.4% Feb 2035 now $2.3bn.


    • NiSource priced a $750m 5y benchmark. Leads WFS, BofA, JPM and MIZ.  Baa3/BBB+/BBB.  +155bps.


    • Extra Space Storage priced an upsized $500m 5y. Leads JPM, PNC and TSI.  Baa2/BBB.  +200bps. Upsized from $350m.


    • Oklahoma Gas and Electric priced a $350m 30y. Leads WFS, MIZ and RBC.  A3/A-/A. +190bps.


    • Republic Services priced a $1.2bn 2-part ($400m 6y and $800m 11y). Leads  BofA, JPM, SMBC, TSI and WFC.  Baa2/BBB+/BBB+. +120bps, +145bps.


    • Southwest Gas priced a $300m 5y. Leads BofA and JPM.  Baa1/BBB/A.  +175bps.


    • Indiana Michigan Power priced a $500m 30y. Leads BofA, Citi, PNC and RBC.  A3/A-/A.  +190bps.


    • Brown-Forman priced a $650m 10y benchmark. Leads BofA, Citi, JPM and USB.  A1/A-.  +120bps.


    • Duke Energy Indiana priced a $500m 30y FMB deal via BofA, Citi, SMBC, TD and TSI.  Aa3/A.  +170bp.


    • MetLife priced a $1bn 10y. Leads BofA, Citi, JPM and MIZ.  Aa3/AA-/AA-.  +158bps.