EUR Swaps: Resilient amid OPEC and supply

Computer lines code 30 Jan 2023
Bunds have recouped earlier losses despite a spike in oil prices and impending sovereign supply.

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  • Resilient amid OPEC and supply 
  • 10s/30s stable amid turmoil - DB
  • New issues

    Resilient amid OPEC and supply
    Bunds began the session under pressure as oil prices spiked after OPEC+ unexpectedly announced a cut to production. However, the Bund has since pared earlier losses with the 10y future last trading near unchanged while Brent is around $4.8 higher near $84.7 after testing $86.4 at the open. Core euro cash breakevens are around 10bps wider with oil, with natural gas futures also firmer.

    One trader felt the rebound in Bunds slightly perplexing, “With month-end out of the way and all the supply coming in a shortened week then I think people were expecting a bearish market.”


    This week’s scheduled supply brings deals from Germany, France, Netherlands and Austria. Plus, Cyprus today announced plans for a 10y Sustainable through Barclays, HSBC, JPM, MS and SocGen.

    Still, the above trader added that volumes were starting to thin out into the Easter holidays and felt positioning could also be a factor for the rebound in Bunds. “Most people were setting up new shorts (last week) and I think it’s natural we’ll see some cutting back into the long weekend,” he said.

    Also in the mix, ECB GC member Simkus said the central bank had “covered the larger path” of interest rate increases and added “there are more factors than the OPEC decisions”. However, one dealer was not sure his remarks had made much of a direct impact on the market.

    Elsewhere, new issuance has seen a few more mandates hit the screens including BPCE and DZ Hyp working on euro deals. Bund asset swap spreads are tighter, led by the front-end with last prices Schatz at 75.5bps (-4.0bp), Bobl at 72.9bps (-1.5bp), Bund at 69.8bps (-1.4bp) and Buxl at 33.1bp (-0.4bp). 


    10s/30s stable amid turmoil - DB
    In a recent strategy note Deutsche Bank looks at how EUR 10s/30s has been relatively stable during recent credit turmoil. The bank writes:

      ”We have refreshed our model for 10s/30s term premia, which assesses it against 5s/10s term premia and vol. Whilst the front end has been highly volatile over the past month, term premia has been far more stable. What is somewhat notable is that despite a rise in vol over the period, 10s/30s term premia has largely flatlined, leaving the residual marginally less negative as a result. This arguably could reflect the fact that the residual had in any case been in very negative territory already, a reason behind our 10s/30s term premia recommendation which we continue to maintain.”


    New issues

  • Italy plans EUR Oct 2031 Green BTP through BBVA, BNPP, BofA, CA and MPS.


  • CoE plans EUR 7y Social Inclusion through HSBC, ING, SocGen and TD.


  • DBJ is pricing EUR 5y around swaps +26bps through Daiwa, GS, MS and Nomura (B&D).  


  • Cyprus plans EUR 10y Sustainable through Barclays, HSBC, JPM, MS and SocGen.

  • Regie Autonome des Transports Parisiens plans EUR 10y through BNPP, CA, HSBC and Natixis.

  • BPCE plans EUR 5y Covered through Deka, Erste, Helaba, JPM, Natixis, Nordea and Santander.

  • Telecom Italia is tapping €400m 6.875% 2028 through GS (B&D).

  • DZ Hyp plans €500m (max) 4.5y Covered through ABN, BayernLB, Commerzbank, DZ, Natixis and Scotiabank.

  • VUB Banka plans €500m (max) 3.5y Covered through DZ, Erste, IMI Intesa Sanpaolo, LBBW and UniCredit.

  • Swedish Export Credit plans EUR 3y through Barclays, CA, Danske and DB.

  • Arval Service Lease is pricing €800m 2.5y around swaps +800bps through BBVA, BNPP, HSBC, ING, Standard Chartered and UniCredit.