USD Swaps: 5y comes through; USTs recede lower

Chart line 30 Jan 2023
The 5y auction enjoyed a good set up with USTs selling off to the lows of the day prior, and it came 1bp through. Swap spreads ticked wider.

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  • 5y comes through; USTs recede lower

  • New issues


    5y comes through; USTs recede lower

    Treasuries have backed off the lows of the day with yields last around 4 to 5.5bps higher on the day. The 2y note yield is last 3.934% or 4.6bps higher on the day after seeing an intraday high yield of 3.994% while the 10y note yield is last 3.443% or 4.3bps higher on the day. 5s30s is 0.8bps steeper at 22bps. Equities close near the lows of the day ahead of Meta earnings (DJIA -0.68%, S&P -0.52% and Nasdaq +0.47%). Meanwhile First Republic shares circled the drain, dropping 21% into the close. 


    Amid the concession-friendly backdrop into the auction, the $43bn 5y auction came 1bps through the 1pm bid side, drawing a rate of 3.50%.  Indirects rose (69.1%) while direct bidders dropped (17.3%), leaving primary dealers with a slightly higher allocation versus last month at 13.628%. The bid-to-cover was higher at 2.54x.


    Meanwhile swap spreads ticked up higher versus the underlying UST selloff, amid mixed volumes as the longer end saw higher than average volumes versus lower than average volumes in the belly and 3y.


    IG new issuance saw $6.15bn price today with a $2.5bn 2-part from American Express along with a $3bn 3-part from ERAC USA and on the SSA side, Swedish Export Credit priced a $1.25bn 2y.


    In terms of total IG volumes, analysts at JP Morgan find the magnitude of recent debt issuance “somewhat underwhelming.” To be sure, the bank notes that overall high grade issuance totaled $26bn last week and with $48.6bn so far in April, by its tally. “These are not unusually large - indeed, this month has seen the lowest issuance in comparison to April issuance in each of the past five years,” JP Morgan highlights.  As a result, the bank notes that the narrowing pressure on swap spreads “has likely only been modest” with for example last week seeing spreads “actually modestly wider over the week.”


    2s +2bps (-0.875bps)*, 3s -10.75bps (+0.5bps), 5s -21.25bps (+0.625bps), 7s -28.625bps (+0.5bps), 10s -28.75bps (+0.375bps), 20s -64.875bps (-0.375bps), 30s -70.375bps (-0.25bps).


    *adjusted for the 6bps give.



    New issues  


    • 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.


    • 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.  


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


    • Empresa Nacional del Petroleo priced a $500m 10y benchmark via Citi, Santander, Scotia and SMBC.  Baa3/BB+/A-. +275bps.


    • American Express priced a $2.5bn 2-part ($1.25bn 3y NC2 and $1.25bn 11y NC10). Leads Citi, HSBC, MS and RBC.  A2/BBB+/A.  +98bps, +160bps.


    • ERAC USA Finance priced a $3bn 3-part ($1bn 5y, $1bn 10y and $1bn 30y). Leads JPM, MIZ and RBC.  Baa1/A-.  +120bps, +150bps, +175bps.


    • SMBC Aviation Capital priced a $650m 5y at Treasuries +200bps via Citi, CA, GS (B&D), JPM, RBC and SMBC. A-/BBB+.


    • Private Export Funding priced a $300m 4.5y deal via HSBC, KEYBCM and SMBC.  Aaa/AAA.  +43bps.


    • Sasol Financing priced a $1bn 6y at 8.75% through BofA, Citi (B&D), SMBC, IMI, JPM, Mizuho, MUFG, SMBC and StanChart.


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