EUR Swaps: Schatz ASW leads more widening; 3s6s bids

Bond chart table 30 Jan 2023
Front-end Bund ASWs have once again led widening, while traders see bids in 3s6s basis.

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  • Schatz ASW leads more widening; 3s6s bids
  • Not again! - Commerzbank
  • New issues

    Schatz ASW leads more widening; 3s6s bids
    Another cautious session in Europe has seen the Euro Stoxx lose around -1% while the Bund future has rallied about 50 ticks and the 10y yield has declined by -3.5bps to 3.48%. First Republic shares are down another 12% in pre-market trading.

    Front-end Bund ASW spreads have once again led the widening with the Schatz last at 81.4bps (+1.7bp) and almost 10bps wider than a week ago. “There’s been a mix,” said one trader when asked about flows amid reports that fast money selling has kept a lid on risk-off buying from investors.

    In the short-end, Euribors have continued yesterday’s rally with reds trading up to 9bps higher. The May €STR ECB date has declined by -2.1bp to 3.199% while €STR fixed at 2.901% (-0.4bp) on April 25. In latest data, consumer confidence in both France and Germany printed higher than consensus.

    Elsewhere, new issuance continues to hit the screens with today’s deals including Santander Consumer Finance EUR 5y and Unedic €1bn 10y Social bonds. In sovereign supply, Finland is pricing €3bn long 10y via syndication.

    In basis, 3s6s has seen decent widening. For instance, 10y was last +0.5bp at 3bps and the highest since mid-March. “We saw good bids this morning and there was some chatter about deals getting swapped,” a dealer said.

    In swaps, the direction has been steeper across the curve with last prices 2s/5s at -41.75bp (+1.25bp), 5s/10s at -8bps (+2bps) and 10s/30s at -42.25bps (+1.75bp). “There’s been a bit of opportunistic receiving in the longer-end and that’s pushed it back down a bit,” a trader said.


    Not again! - Commerzbank 

    In a strategy note published today Commerzbank turns tactically neutral on Schatz ASW amid recent spread widening. It writes:

    • ”Front-end led rallies are hardly new, but the latest leg lower in benchmark rates has a different trigger. Scarcity fears once more seem to be unfolding with Schatz spreads widening a massive 5bp yesterday, underpinned by strong volumes in the future and more negative banking news out of the US in the afternoon.

    • ”Recall that the new €STR-20bp ceiling for sovereign deposits goes live next week. At the same time, the unprecedented swing in the DFA's liquidity balance combined with the surprise BuBa disclosure that it is already paying 10bp less than the ECB prescription is underpinning concerns that Bund specials might either have to richen again or become scarce on lower DFA lending.

    • ”In addition, the US banking and debt ceiling concerns are compounding the demand for safety triggered by the crisis. Although this is leaving Schatz spreads with the largest premium since 6 September, i.e. the height of the scarcity hype, judging by our structural fair value model. The momentum seems strong for now and we turn tactically neutral on Schatz spreads given the risk of re-widening to 100bp.”


    New issues

  • BNG Bank is tapping €250m 2038 at swaps +30bps through BofA and Santander.

  • Finland is pricing €3bn long 10y at swaps -1bps through BNPP, Citi (B&D), CA, DB and Nomura. Latest order book size reported to be around €10.3bn.

  • Unedic is pricing €1bn 10y Social at OATs +20bps through BNPP, Citi, JPM (B&D), Natixis and NatWest.

  • Ethias SA may sell €250m 10y Green Tier 2 on Thursday through JPM.

  • Telstra Group is pricing €500m (max) 8y at swaps +73bps through BNPP (B&D), BofA and MUFG.

  • Rentenbank is tapping €500m 2030 at swaps -10bps through BofA, CA and NordLB.

  • Var Energi is pricing €500m 6y around swaps +255bps through CA, IMI, ING, SocGen (B&D) and UniCredit.

  • LF Hypotek is pricing €500m (max) 6y Covered at swaps +22bps through Deka, LBBW, Nordea, SocGen and TD.

  • Santander Consumer Finance is pricing EUR 5y Senior Preferred around swaps +130bps through Santander (B&D), CA, ING, Mizuho and UniCredit.

  • State of Berlin is pricing €500m 5y at swaps -9bps through BayernLB, Citi, Deka, DB (B&D) and LBBW.

  • Carrefour Banque is pricing €500m 4y around swaps +90bps through BBVA, BNPP (B&D), CA, CIC and SocGen.

  • BAWAG PSK is pricing €750m 3y Covered at swaps +16bps through BayernLB, Citi, Commerzbank, Deka, Erste and IMI.

  • KEB Hana Bank is pricing €600m 3y Social Covered at swaps +47bps through BNPP, Citi, CA (B&D), HSBC and SocGen.

  • Bank of Nova Scotia is pricing EUR 2y FRN at 3mE +43bps through DB, Lloyds, Santander and Scotia.