USD Swaps: Holding pattern pre-CPI; Preview

Canada bound
Ahead of CPI, USTs ended with a modest bear flattening. Swap spreads see belly spreads widen. IG priced $1.95bn. Barclays previews CPI.

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  • Holding pattern pre-CPI; Preview

  • New issues


    Holding pattern pre-CPI; Preview

    Post-NFP and pre-CPI, and with Europe out for Easter Monday, Treasuries took back earlier gains to end the session near unchanged on the day. The 10y note yield is last at 3.421% after a low of 3.348% this morning. The curve is flatter at 2s10s is last 0.25bps lower at -59.3bps and 5s30s -0.5bp flatter at 10.9bps. Equities climbed higher from the earlier lows and ended with modest gains/losses (DJIA +0.3%, S&P +0.1% and Nasdaq -0.03%).   


    Swap spreads saw the belly outperform versus the long end amid lackluster volumes. On the IG side $1.95bn priced across four issuers, and the demand for the issuance was weak as all the issuance today priced at or near initial price talk. Meanwhile, tomorrow sees the first leg of the Treasury refunding, starting with $40bn 3y, followed by $32bn 10y reopening on CPI Wednesday and $18bn 30y reopening on PPI Thursday.


    Looking ahead to Wednesday’s CPI, analysts at Barclays expect headline CPI “to have risen 0.20% m/m sa and 5.1% y/y in March and the NSA index to be 302.241” and that the “annual rate slows substantially from February (6.0% y/y), as base effects kick in to the calculation.”


    • Barclays estimates “core CPI to have risen 0.40% m/m sa (5.6% y/y) in March, lower than its February pace (0.45%). While this would still be a firm reading, we expect the underlying dynamics to have been slightly different last month. In particular, we look for a moderation in core services inflation, led by ex-shelter categories, and instead expect an uptick in core goods prices amid a smaller decline in used cars CPI.”


    • “The CPI-equivalent of ‘supercore’ inflation is expected to have slowed to 0.33% m/m (from 0.49% m/m) and 6.1% y/y, although this would still leave the 3mma rounding up to 0.4%, about twice the pre-pandemic pace. Excluding health insurance, we estimate the CPI supercore measure should print 0.44% m/m (3mma: 0.54%), slowing from 0.61% in February.”


    • Further out, Barclays’ medium-term core CPI forecasts “remain largely unchanged, with inflation rounding up to 3.4% y/y in December 2023, before declining to 2.6% y/y in December 2024” while its headline CPI path “has shifted slightly higher, with annual average inflation estimated at 4.1% (+0.3pp) in 2023, primarily reflecting the latest gasoline futures prices, which have shifted higher”  the past week following OPEC’s announcement of a production cut.


    2s +3.875bps (-0.375bps), 3s -11.625bps (+0.625bps), 5s -21bps (+0.5bps), 7s -28.375bps (+0.375bps), 10s -28.25bps (+0.25bps), 20s -62.75bps (-0.25bps), 30s -69.75bps (-1bps).



    New issues

    For a complete review of issuance over the past week, please see USD New Issues.


    • Macquarie AirFinance Holdings plans a $500m 5y NC2 fixed. Leads JPM, Citi, Mizuho, BNPP, MUFG, Natwest, HSBC and DBS. Price talk 8.75%-9%.


    • Jabil priced a $300m long 5y fixed. Leads BofA, JPM, Mizuho and USB. +205bps.


    • Protective Life priced a $300m 3y FA backed. Leads Citi, USB and WFS. A1/AA-/AA-. +145bps.


    • Take-Two priced a $1bn 2-part ($500m 3y and $500m 5y). Leads JPM and WFS. Baa2/BBB.  +125bps and +145bps.


    • Federal Realty priced a $350m 5y Green fixed. Leads BofA, JPM, PNC, TD. Baa1/BBB+. +195bp.