EUR Swaps: PMIs mixed, HICP eyed; Paying; €STR

Computer lines code 30 Jan 2023
Euro PMIs were mixed while Bunds are little changed. Ahead, dealers are eyeing next week's HICP data.

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  • PMIs mixed; CPI eyed; Paying flows
  • €STR panel gets 24 new banks
  • Flatteners for a hawkish ECB - SocGen
  • New issues

    PMIs mixed; CPI eyed; Paying flows
    Euro PMIs were mixed with Services beating expectations at 56.6 vs 54.5 whereas Manufacturing came in at 45.5 vs 48. The Bund future lost up to 36 ticks earlier but has since rebounded and was last down 20 ticks while the 10y yield was marked 2.46% (+2bps). Global stocks are a touch lower and the Euro Stoxx is down by -0.2%.

    In latest ECB speak, Finland’s Rehn and Croatia’s Vujcic both stressed that inflation remains too high. In the short-end, Euribors are down a few ticks but still trading within yesterday’s range.

    Ahead, one dealer trader said next week’s HICP inflation data will be the focus for euro traders with the market unsure about a 25bp or 50bp hike at the next meeting. “Most people are still holding out for 25bp but a stronger number could push us to 50bp,” he said. The French, Spanish and German numbers will print at the end of next week. 

    Bund asset swap spreads are little changed having widened over the course of the past few sessions. “Outright paying has managed to counterbalance some of the receiving we saw on the back of new issues,” remarked one trader.

    Last prices were Schatz at 75.2bps (+0.9bp), Bobl at 71.3bps (unch), Bund at 68.0bps (-0.1bp) and Buxl at 33.0bps (-0.2bp).

    Elsewhere, the swap curve was little changed with 2s/5s at -40bps (unch), 5s/10s at -10.5 (-1bp) and 10s/30s at -44bps (+0.75bp).


    €STR panel gets 24 new banks
    The ECB announced today it is adding 24 new banks to the 47 banks currently reporting to its Money Markets Statistics Reporting (MMSR) panel. The data from the new banks will be included in the €STR rate “at a later stage” in order to provide “a robust and reliable benchmark”. The new banks will be added on July 1 2024. Further details can be found here


    Flatteners for a hawkish ECB - SocGen
    Strategists at Societe Generale recommend holding flatteners, such as 2s/5s and targeting -50bps amid expectations of a hawkish ECB. It writes:

    • “Terminal rate expectations are rising decisively again, with central banks seen as more likely to push rates higher, earlier, and delay rate cuts to 2024. Markets are now pricing a 31% probability of a 50bp hike by the ECB at the May meeting, while the terminal deposit facility rate expectation has climbed to 3.85%…

    • “The hawkish camp within the ECB has been most vocal recently. Governor Wunsch of the National Bank of Belgium stated his preference for a 50bp move and a total stop to PSPP reinvestments in July. A recent Reuters article citing internal ECB sources also pointed to more ECB members leaning in this direction….

    • “EUR curve flatteners remain the best way to capitalise from a more hawkish ECB, with a few meetings ahead before the terminal rate is reached. We continue to favour 2s/5s flatteners, targeting -50bp, and still expect a better performance in the belly of curves, favouring the belly of 2s/10s/30s, 5s/10s/30s and 2s/5s/10s flies – these flies could continue to perform and stay below forwards, especially as they tend to perform until the last rate hike in the tightening cycle is either very close or past. Similarly, real curves should also flatten, especially given the very large demand for long-end OATei linkers seen recently.”


    new issues

  • SFIL SA is pricing EUR long 7y around OATs +42bps through Barclays, CA (B&D), La Banque Postale, MS and SocGen.

  • Banca Transilvania is pricing €300m (min) 4y NC3 SNP around 9.25% through MS.