EUR Swaps: Issuance revival as risk sentiment stabilises

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A risk-on session has seen yields climb and new issuance return.

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  • Issuance revival as risk sentiment stabilises
  • Bund ASW tightener - Deutsche Bank
  • Dutch election and pensions - Rabobank
  • New issues

    Issuance revival as risk sentiment stabilises
    A risk-on session has seen the 10y Bund yield climb by 12.5bps to 2.25%, the Euro Stoxx gain 1% and the Euro Stoxx Banks Index rally by 1.6%.

    The gains have come amid a recovery in the Deutsche Bank share price, last up around 3% near €9 versus a low of €8 on Friday, while the CDS has narrowed about 13bps to 200bps. “The move in Deutsche Bank (last Friday) was overdone and out of proportion, but it just goes to show how sensitive the markets are at the moment,” said one trader.

    In latest ECB news, Bloomberg reports that ECB Executive Board and GC member Schnabel pushed for the March 16 monetary policy statement to signal the possibility of more rate hikes in the future. In the short-end, red Euribors have sold off around 12.5bps.

    Elsewhere, euro new issuance has seen a pick-up in activity after shutting down during last week’s market turmoil. Today, CIBC is pricing €1.5bn 4y Covered and RCI Banque is pricing €750m 4y.


    Ahead, the EU has announced that it plans to tap 2048 Green bonds through BofA, DB, JPM, Nomura and Nordea in the near future. The EUR 10s/30s swap was was last 1.5bp steeper at -47.5bp.

    Bund asset swap spreads are tighter in-line with the Bund sell-off and amid the revival of new issue activity. Last prices were Schatz at 80.4bps (-3.1bp), Bobl at 77.9bps (-3.7bp), Bund at 74.7bps (-3.0bp) and Buxl at 34.2bps (-1.8bp).

    In basis, IMM FRA/OIS spreads are tighter with the front contract last at 19.8bps (-1.6bp) while further out on the curve BOR/OIS 5y was at 16.9bps (-0.9bp) and 10y at 17.5bps (-0.8bp).


    Bund ASW tightener - Deutsche Bank
    Strategists at Deutsche Bank recommend entering a Bund ASW tightener targeting 65bps with a stop at 85bps as a tactical hedge. It writes:

      “EGB spreads have been relatively well behaved, ie. more resilient than in previous crises, hence this has not been a source of Bund ASW widening (as it has been historically). Moreover, Bund ASW looks a little wide relative to other spreads that capture measures of stress, in the sense that it hasn't corrected by as much as its peers from last week's peak. Finally, the fundamental case for tighter ASW remains valid from a supply/demand perspective (e.g. no downward revisions in Q2 Bund supply and potential for accelerated QT in H2). This is reflected in our Bund ASW model which currently indicates that Bund ASW is around 20bp too wide.”

    Dutch election and pensions - Rabobank
    In a recent strategy note Rabobank discusses the possible impact of recent provincial election in the Netherlands and its possible impact on pension reforms. In conclusion, it finds:

      "Even in the new Senate there is (technically) still enough support for the legislation. However, the deadline of July 2023 does seem more challenging. The requirements for the transition plan provide an additional incentive to reduce balance sheet volatility. This will likely increase the (temporary) demand for interest rate hedging up to the transition date by Dutch pension funds. As of 2022 Q4 Dutch pension funds hedged approximately 55% of their liabilities which is an increase of 1% compared to 2022 Q3."


    New issues

  • European Union plans to tap EUR 2.625% Feb 2048 Green bonds through BofA, DB, JPM, Nomura and Nordea.

  • Wolters Kluwer NV is pricing EUR 8y around swaps +125bps through ING (B&D), ABN Amro, BofA, Citi and Rabobank.

  • Ahold Delhaize NV is holding investor calls today for the sale of EUR 5y Green through BNPP, BofA, DB, GS, ING and Wells Fargo.

  • Nexans SA is holding investor calls today for the sale of €325m 5y SLB through BNPP and CA.

  • CIBC is pricing €1.5bn 4y Covered at swaps +33bps through CIBC, Danske, HSBC, LBBW and Natixis.

  • RCI Banque is pricing €750m 4y at swaps +155bps through BNPP, Mizuho, SocGen and UniCredit.