USD Swaps: USTs steepen; Risk-on; 30y on the screws

Steepest road
The Treasury curve has steepened further, though outright changes have been modest. The 30y auction came close to the 1pm bid side.

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  • USTs steepen; Risk-on; 30y on the screws  

  • New issues


    USTs steepen; Risk-on; 30y on the screws  

    Treasury price action has been relatively sedate with the curve steepening out while changes on the day have been limited to +/-3bps. The 10y note yield is last 3.424% or 2.4bps higher on the day while 2s10s is last 4.8bps higher to -52.5bps and 5s30s 3bps steeper at 19.2bps. Equities are gaining (DJIA +0.81%, S&P +0.97% and Nasdaq +1.65%).


    As for the final leg of UST supply, the $18bn 30y reopening came near the bid side of the 1pm level, drawing a rate of 3.661%. Indirects dropped to 69.1% while directs stayed the same at 19.8%, leaving dealers with a slightly higher allocation of 11.1% compared to last month. Meanwhile the bid-to-cover was a touch higher at 2.36x. Earlier today, the Treasury announced that it will reopen $12bn 20y next Wednesday and $21bn 5y TIPS Thursday.


    One source noted that the jury it still out on if the Fed hikes again in May, noting that some market participants feel that the Fed would likely prefer to go 25bps, rather than pause and then need to do a hike further down the line. The futures market now sees 25bp hike at 66.5% versus 33.5% for no hike.


    Further out this year, looking at the three cuts priced into by year end, one trader questioned “it’s already April so then we see 75bps of cuts for the remaining eight months?” and thus the source felt that the front end should selloff, though perhaps is being buoyed by short term buys from money markets and other parking of cash.


    Swap spreads have not seen much movement with the curve steepening astride the steepening in the underlying curve amid low volumes. On the IG issuance side, American Honda Finance launched a $1.5bn 2-part (2y fixed and 7y), bringing IG supply (ex-SSA) to just under $11bn.


    Ahead, bank earnings releases commence with tomorrow seeing JP Morgan, Citigroup and Wells Fargo report Q1 2023 results, followed by Bank of America and Goldman Sachs on Tuesday April 18th, and Morgan Stanley on Wednesday April 19th.  


    2s +1.875bps (-0.25bps), 3s -10.25bps (-0.375bps), 5s -21.25bps (unch), 7s -29bps (-0.125bps), 10s -29.75bps (+0.125bps), 20s -64.25bps (+1bps), 30s -71.5bps (+0.625bps).



    New issues


    • American Honda Finance launched a $1.5bn 2-part ($800m 2y fixed and $700m 7y). Leads  BNPP, MUFG, SocGen and SMBC. A3/A-. +65bps and +115bps. It dropped plans for a 2y FRN. 


    • OMERS Finance Trust priced a $1bn 5y at swaps +83bps. Leads are BofA, Citi, RBC (B&D) and TD. Aa1/AA+/AAA.