Basis: Aussies point to direction of travel; Gilt hedges



  • Aussies point to direction of travel; Gilt hedges

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Aussies point to direction of travel; Gilt hedges

A bright but blustery day in the City of London saw a lot of the big ticket names in cross-border issuance float away on the breeze, leaving three plucky Aussie borrowers to fight the turbulence while indicating the direction of travel in this market.


One seasoned basis swapper at an active market participant summed up events so far today thus: “Since the EIB (a $4bn, 7y Global on Tuesday) it seems there isn’t much cross-border risk out there.” What there is, he said, is largely thanks to “quite a few Aussie borrowers out there in EUR.”


He noted the €650m of 10y from Melbourne toll-road operator Transurban yesterday, today’s €1bn, 10y from Sydney Airport and the upcoming 8-10y EUR benchmark from Telstra which, like Transurban, is from Australia’s alleged new biggest city of Melbourne.  


The above basis swapper said this afternoon that “after the EIB’s Jumbo USD on Tuesday it seems all the big names (apart from JFM, see new issues) have done their statement bits in that currency and EUR is now the currency du jour at the moment.”


As for that standout EIB deal, rather than, as some suggested on Tuesday, sitting in a freezer in Luxembourg, waiting to be sent to the lab for processing, the above swapper said that “last week there was a really strong bid in 7y EUR/USD for apparently no reason, now it seems likely that they pre-hedged.”


Away from the mainstream of EUR/USD and into the privatized toxic backwaters of cable, there has been limited issuance to stir the juices in the 2y to 10y part of the curve, but that is partly down to gilt volatility which instead caused ripples elsewhere.


But before that one trader did note 4y5y curve action in cable yesterday which was impacted by the one GBP deal that’s on the table. He said there was with “one keen payer” bidding 5y up to -15bps, from -16.75bps on Monday, while receiving 4y. Why? “I’m not sure why,” said the basis swapper.


But since then, he said, the arrival of a £300m 5y Sustainable bond from the IADB, due to price imminently at gilts +49bps, saw the 5y directionality reverse late yesterday and today, bringing it down to a current -16bps.


And as for that long end, there has been some activity in 30y40y cable basis today at -2.125bps, tightening it into a mid-priced -1.875bps right now. The above-quoted basis swapper said that “there was a big sell-off in gilts yesterday on above-forecast inflation and so there’s some gamma to clear up which we’re seeing in 30y40y.”


Also he said yesterday’s volatility saw 10s30s cable flatten to -15bps, but with 30y cable being paid today, that has now tiptoed back up to -14.5bps.  



Basis trades on the SDR can be seen here: Total Derivatives SDR.


New issues


USD new issues:

  • Japan Finance Organisation for Municipalities (JFM) (A1/A+) plans a $1bn 5y at swaps +81bps. Leads are Barclays, BofA (B&D), JPM and Nomura.


  • China’s New Development Bank (AA+/AA) priced a $1.25bn 3y Green bond Leads are Citi, CA, HSBC and ICBC. AA+/AA. Mid swaps +125bps.


  • Canada yesterday priced a $4bn 5y Global at Treasuries +11bps via Barclays, BofA, CIBC, RBC and TD (B&D).


  • Kommuninvest yesterday priced a $1bn short 3y. Leads Barclays, CACIB, Danske and Nomura. Aaa/AAA. Mid swaps +27bps.


EUR new issues:

  • Sydney Airport Finance today priced a €1bn, 10y, secured bond at swaps +135bps via BNPP, Credit Agricole (B&D), RBC and SocGen.


  • Transurban Finance yesterday priced a €650m, 10y, secured bond at swaps +115bps bond via BNPP, BofA (B&D) and SocGen.


GBP new issues:

  • The IADB is close to pricing a 5y £300m Sustainable bond at gilts +49bps via BofA, HSBC and RBC.