EUR Swaps: US data eyed; FIG issuance revival

US data eyed; Issuance revival
The Bund future has edged slightly lower, last down by 25 ticks, as the market awaits US CPI data for its near-term cue. The Bloomberg consensus is for 5.1%yoy from 6.0%. “Core is likely to see another rise, but the key part is that it seems we are near the peak,” said one euro trader.

Meanwhile, euro new issuance has seen several European banks targeting the 5y to 7y sector with covered bonds. In the market, the Bobl and Bund spreads are both around 0.75bp tighter at 71.1bp and 67.9bps, respectively. In basis, 3s6s 5y is marked 0.5bp wider at 5.65bps and back towards the top of its recent range.

“There’s a few flows appearing on the back of supply, but it still has the holiday feel,” reported one trader. In euro swaps last prices were 2s/5s at -36bps (unch), 5s/10s at -9.25bps (-2bps) and 10s/30s at -42bps (-0.25bp).

In sovereign supply, Germany is today targeting the longer-end of the curve with the sale of €818m 2048 at 2.33% and bid to cover of 1.92 alongside the sale of €1.22bn 2052 at 2.31% and bid to cover of 1.09.

In euro swaps last prices were 2s/5s at -36bps (unch), 5s/10s at -9.25bps (-2bps) and 10s/30s at -42bps (-0.25bp).

Belly should outperform wings - SocGen
Strategists at Societe Generale identify ten trades for spring and argue the euro belly should outperform the wings. The bank writes:

• "We saw a massive re-steepening in the US curve as markets priced the end of Fed rate hikes. Unsurprisingly, the EUR curve followed suit, but this was a premature move, with the ECB still to deliver a decent amount of rate hikes.

  
  

• “We faded the re-steepening of the EUR 2-5y swap curve, given: 1) how low terminal rates were priced; and 2) the fact that the ESTR curve had priced in only minimal rate cuts between March 2024 and March 2025 (as this curve is tightly correlated to the slope between the 4th and 8th Euribor contracts).

  
  

• “We believe a push higher in terminal rates, coupled with rising concerns over the global economy, should drive a further re-flattening of the front end of the EUR curve. Any expectations of cuts should be pushed back to late 2024.

  
  

• “We stick with 2-5y flatteners (we target -50bp) to continue to receive the belly of EUR 2-5-10y and 2- 10-30y flies. These flies tend to perform well past the last rate hike in the cycle, and will, in our view, require rate cuts before reversing course.”

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