Basis: Quiet Thursday as basis bids subside after KfW

Beneath a calm sea 30 Jan 2023
Before Good Friday comes Quiet Thursday, certainly for the cross-currency basis market anyway. SSA flows have faded and EUR/USD is settling down.

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  • Quiet Thursday as basis bids subside

  • Flows

  • New issues


Quiet Thursday as basis bids subside

Before Good Friday comes Quiet Thursday, certainly for the cross-currency basis market anyway, with a striking dearth of bond issuance allowing basis to settle down gently after a bit of a thin market shake-up from individual issues earlier in the week.


One such area of shake-and-settled activity has been 3y EUR/USD, where one active cross-currency basis trader said this afternoon, there was a lot of paying activity late Monday and most of Tuesday, taking 3y EUR/USD from -26.25bps Monday morning to -24.25bps late on Tuesday.


The basis trader said “there was decent flow related to KfW’s ($3bn 3y Global at swaps +20bps early on Tuesday) deal which saw that part of the EUR/USD well bid in fairly illiquid conditions. Since then it has headed back to -25.625bps.”


Similar peregrinations were noted across the curve as levels oscillated to find a position where they might be comfortable as they approach the two-stage market shutdown, beginning with Europe tonight and the US sometime after non-farm payrolls tomorrow.  


The 15y part of the extremely flat EUR/USD curve saw some active duty at -24.75bps on Wednesday (yesterday), but the above swapper said “I’m not sure it was enough to suggest the World Bank was behind it.” The World Bank yesterday priced a €2bn 15y bond at swaps +25bps.


Again the direction of travel in EUR/USD seems to be a subsidence after a recent phase in which USD cross-border issuance has been livelier than of late while EUR has been quieter. Looking ahead, the above basis swapper said that “because Europe takes Easter more seriously than the US I think in the short-term we may well see USD issuance more active than EUR and basis better bid for choice.”


Today, after being broadly better bid Mon-Weds the EUR/USD was easing back across its length, by between 0.125 and 0.25bps at most points and by 0.625bps in the 3m at the time of writing.


But beyond next week, the trader said that “the basis swap hasn’t been very compelling from EUR to USD these last couple of weeks, but that can change quickly. EUR issuance generally continues to be strong so it is hard to say what direction the market will take once Easter’s out of the way.” 



Basis trades on the SDR can be seen here: Total Derivatives SDR. Note that the database now shows the trade's broker/platform/bilateral. 


New issues


USD new issues:

  • Quebec yesterday priced a $3.5bn, April 2028 bond at SOFR +56bps via BofA, CIBC (B&D), JPM, RBC and TD.


  • Turkey last night priced a $2.5bn long 7y USD Green Bond at a 9.3% yield via BofA, ING, JPM (B&D) and StanChart.


EUR new issues:

  • World Bank yesterday priced a €2bn 15y Sustainability bond at swaps +25bps. Leads are BNPP, CA (B&D), DZ and NatWest.  Books above €2bn.


GBP new issues:

  • National Australia Bank yesterday priced a £210m, 1y FRN at SONIA +48bps. Via Rabo.


  • Bank of Nova Scotia late Tuesday priced a £310m, Dec 2024 SONIA +55bps FRN. Self-led.


JPY new issues:

  • Berkshire Hathaway plans a JPY deal via BofA and Mizuho. 


  • Lloyds Bank last night priced a 3-year, JPY 3.3bn, 0.6% bond at par via SMBC.