USD Swaps: USTs pressured despite more First Republic woes; 5y auction up next

Chart numbers 14 Jun 2022
USTs are lower despite continues woes for First Republic Bank shares. JPM previews today’s 5y note auction.

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  • USTs pressured despite more First Republic woes; 5y auction up next

  • New Issues


    Click here for SDR USD IRS trades.


    USTs pressured despite more First Republic woes; 5y auction up next

    First Republic Bank share remain bidless – down another 22% today – but better than expected earnings from tech titans Alphabet, Inc. and Microsoft Corp. have helped assuage broader sentiment today, leaving the major domestic equity indices narrowly mixed (Dow -0.33%, S&P -0.01%, Nasdaq +0.94%). 


    Against this backdrop, Treasuries are off their recent highs with yields up across the board once again as the curve bends a little flatter today.  The benchmark 10y note yield is last 1.5bps higher at 3.415% after carving out an intraday range of 3.3733%-3.4372% thus far, while the 5s30s spread is 3bps narrower at 17.5bps. 


    Meanwhile, red SOFR futures are posting 1.5 to 6.5 ticks losses while SOFR swaps spreads are mostly wider amid paltry activity in all tenors thus far today.  IG issuance is picking up a bit in the wings with deals from the likes of Swedish Export Credit and American Express on today’s roster.


    Ahead, Treasury will auction $43bn 5-year notes, unchanged in size from last month, after yesterday’s $42bn 2y note was met with decent end-user demand (see Total Derivatives).  Heading into today’s supply, strategists at JP Morgan believe that some more cheapening of the issue may be needed for a smooth process today.  The bank highlights the following:


      ”…The March 5-year auction cleared at 3.665%, 0.9bp through pre-auction levels as the share awarded to end-users ticked down slightly to 86.7%. More granularly, both investment manager and foreign take-down declined slightly last month to 70.4% and 14.0%, respectively.


      “…Five-year Treasury yields have declined 22bp since the March auction and intermediate Treasuries remain rich relative to the market’s Fed and inflation expectations as well as our medium-term growth forecasts.


      “…Along the curve, the 5-year sector looks fairly priced on the fly after adjusting for the level of rates and the shape of the curve. The WI roll opened at -1.75bp, and has cheapened to -1.3bp since.


      “…. On net, given the recent move to lower yields, and with valuations looking fair on the curve and rich to fundamental drivers, we think (today’s) auction could require a further concession in order to be digested smoothly.”


    Currently, SOFR swaps – 2s 2.25bps (-0.875bps)*, 3s -10.625bps (+0.5bps), 5s -21.5bps (+0.375bps), 7s -28.5bps (+0.5bps), 10s -28.625bps (+0.5bps), 20s -65bps (-0.5bps), 30s -70.5bps (-0.375bps).


    * adjusted for the 6bps give.



    New issues

    • American Express is working on a 3NC2 aand 11NC10 benchmark via Citi, HSBC, MS and RBC.  A2/BBB+/A.  Price talk: +120bps area, +180bps area.


    • Private Export Funding is working on a $300m 4.5y deal via HSBC, KEYBCM and SMBC.  Aaa/AAA.  Price talk: low 50s.


    • ERAC USA Finance is working on a 5y, 10y and 30y benchmark via JPM, MIZ and RBC.  Baa1/A-.  Price talk: +145bps area, +175bps area, +205bps area.


    • Empresa Nacional del Petroleo is working on a 10y benchmark via Citi, Santander, Scotia and SMBC.  Baa3/BB+/A-.  Price talk: +325bps area.


    • SMBC Aviation Capital plans a USD 5y at around Treasuries +240bps via Citi, CA, GS (B&D), JPM, RBC and SMBC.


    • Sasol Financing plans a USD 6y at around 8.875% through BofA, Citi (B&D), SMBC, IMI, JPM, Mizuho, MUFG, SMBC and StanChart.


    • Hungary’s Eximbank Zrt. (BBB-/BBB) is preparing a USD short 5y at around Treasuries +310bps. Leads are ICBC, IMI and JPM (B&D).


    • Korean oil firm SK on (Aa3) plans a USD 3y Green bond guaranteed by Kookmin after meeting investors from Apr 27. Leads are BNPP, CA, HSBC, JPM, MUFG and StanChart.   


    • State Bank of India (BBB-) is preparing a USD 5y through Citi, ENBD, HSBC, JPM, MUFG and StanChart after meeting investors from April 25th.


    • Italian government agency CDP (BBB/BBB) plans a USD 3y to 5y bond. Via BNPP, BofA, Citi, GS, HSBC, IMI-Intesa Sanpaolo, JPM, MS and SocGen.


    • Swedish Export Credit priced a $1.25bn 2y Global at swaps +31bps via BofA, DB, Nomura and TD.  Aa1/AA+.