EUR Swaps: Issuance eyed; ASW hold firm

Line chart 25 Mar 2021
Euro issuance is being eyed meanwhile Bund ASW continue to hold firm.

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  • Issuance eyed; ASW hold firm
  • ASWs to resume tightening - NatWest
  • New issues

    Issuance eyed; ASW hold firm
    The Bund future was last trading near unchanged with the 10y yield marked around 2.49% (+1bp), while European equities are mixed with the Euro Stoxx last -0.08%.

    In data, German IFO Expectations printed higher than consensus at 92.2 vs 91.1. Ahead, the main data highlight is expected to be the release of German, French and Spanish HICP numbers later this week.

    In euro issuance, dealers say one of the standout deals has been the arrival of Proctor and Gamble’s dual tranche as it prices €650m 3.25y at swaps-10bps and €650m 8.25y at swaps+15bps through Barclays, DB and HSBC (B&D). One dealer away from the leads was unsure whether it had been swapped, “It’s been a bit of a one-way market in the (cross-currency) basis recently, so it will be an interesting time for the leads if they are swapping.”

    Meanwhile, one theme over the past week has been Bund swap spreads edging wider. One factor supporting this move has been better paying flows as reported last week.

    Also, the possibility of investors buying on ASW and supporting spreads was mentioned by one trader today. “The EU syndications earlier this year saw good demand on ASW and we could see some more later this week.”

    Earlier today, EU announced plans to sell EUR long 15y through Barclays, Citi, CA, Natixis and Santander. Also, Germany revealed it plans EUR 10y Green through Barclays, BofA, Commerzbank, CA, Danske and NatWest.

    Last Bund ASW prices were Schatz at 75.5bps (+1.8bp), Bobl at 71.1bps (+0.9bp), Bund at 71.6bps (+68.4bps) and Buxl at 33.5bps (+0.8bp).


    ASWs to resume tightening - NatWest
    In its weekly rates research NatWest expects Bund ASW tightening to resume. The bank explains:

    • “March tends to be one of the busiest months of the year for issuers, but volatility around banking sector fragility meant lower supply levels given the uncertain macro backdrop. We think that leaves pent-up supply for the rest of this quarter. The Easter break and blackouts have kept April supply at similar levels to previous years, but May and June should be busy. We’re anticipating close to €85bn in corporate supply in euros for Q2. Strong execution in the last weeks have confirmed that demand is still strong, with healthy investor cash levels.

    • “Asset swaps should resume tightening on financial supply and corporate rate lock unwinds. (Last week’s) asset swap widening doesn’t fit into our framework so we are a little cautious, however. It’s just possible that the widening was related to asset swapping by investors or by anticipation of funding pressure due to the change in remuneration on government deposits (next point). But the pattern of activity fits bank ALM activity. That doesn’t fit into our framework. Mortgage origination is probably still weakening and it’s not clear that the need to hedge loan prepayments would be any stronger, particularly at higher rates.”


    New issues

  • European Union plans EUR Oct 2038 through Barclays, Citi, CA, Natixis and Santander.

  • Germany plans EUR 10y Green through Barclays, BofA, Commerzbank, CA, Danske and NatWest.

  • Proctor and Gamble is pricing €650m 3.25y at swaps -10bps and €650m 8.25y at swaps +15bps through Barclays, DB and HSBC (B&D).

  • Telstra Group may sell EUR 8y on Wednesday through BNPP, BofA and MUFG.

  • TDC Net A/S plans EUR 8y Senior Secured SLB after investor call on April 24 through ING and SEB.

  • Silka Capital B.V. plans EUR 1.5y FRN, 3.5y and 7y after investor calls on April 24 through Citi, HSBC and UBS.

  • Cheplapharm Arzneimittel GmbH plans €250m 7y NC3 and €250m 7y NC1 FRN after investor calls on April 24 through Barclays, DB, JPM, Citi, Commerzbank, GS, ING and UniCredit.

  • Raiffeisen Schweiz plans EUR 5.5y SNP after investor calls on April 24 through BNPP, CS, DB, MS, Raiffeisen and UBS.

  • LBBW is pricing €750m 3.5y Covered at swaps -4bps through BBVA, ING, LBBW, Natixis, RBC and UniCredit.