USD Swaps: USTs slip as Nasdaq gains; Data; Mixed FICCs

Chart numbers 14 Jun 2022
USTs are a touch weaker ahead of the data as tech stocks gain. European banks report mixed results in FICC.

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  • USTs slip before data as stocks gain

  • European bank FICCs mixed

  • Callables and Formosas: IBRD, again

  • New issues


    USTs slip before data as stocks gain

    The Treasury curve is a touch steeper before today’s data, which includes initial claims, PCE (core PCE is seen rising to 4.7% in Q1 from 4.4% in Q4), GDP pending home sales and the Kansas City Fed manufacturing index. The 30y yield is near session highs at 3.72% (+2bps) while 5s/30s is about a bp steeper. Nasdaq futures are +0.9% in the background following more good tech earnings numbers, this time from Meta. Even First Republic shares are up slightly and are +2% in pre-market trading.   


    Shorter in, SOFR futures are 4 ticks lower in the reds and swap spreads are 1.50bps (-1.50) in 2y, -20.25bps in 5y, -28.50bps (unch) in 10y and -70.125bps (+0.25) in 30. SOFR flows are below average except in the 10y bucket.


    Ahead, the Bloomberg consensus for first quarter 2023 GDP growth is for a deceleration to +1.9% versus +2.6% in the previous quarter. Barclays’ GDP forecast is lower still at just 1.0% but much of this is put down to the inventory cycle rather than final demand, as it explains:


      “We expect the Q1 deceleration mainly to reflect normalization in inventory investment, which had surged unexpectedly to $137bn in Q4, contributing 1.5pp to growth. Working from available book value estimates, we expect inventory investment, in chained dollar terms, to drop to around $25bn, somewhat below its Q3 level, subtracting 2.0pp from growth. Although the main source of deceleration is inventories, available estimates suggest that net exports will also contribute somewhat, along with government spending.”


    European bank FICCs mixed

    In the news, a couple of European banks reported first quarter results. Deutsche Bank said that FICC was down but versus a strong Q1 2022 and, within FICC, rates were up. Its shares are +1.5%:


      “FICC Sales & Trading revenues were € 2.4bn, down 17% year on year compared to an exceptionally strong prior year quarter. In Rates, revenues were higher against a very strong prior year quarter…Credit Trading revenues were lower, reflecting the non-recurrence of a concentrated distressed credit position in the prior year, though this was partly offset by growth in flow credit revenues…Foreign Exchange revenues were significantly lower, reflecting heightened interest rate volatility and market dislocation seen during March.”


    Elsewhere, Barclays shares are +4.3%. The bank said that FICC income increased 9% to £1.8bn, driven by “a strong performance in credit”, in contrast to some of the US investment banks.  


    Callables and Formosas: IBRD, again

    • IBRD sold a $50m 15y NC3 fixed callable (non-Formosa). The EMTN matures May 2038, is callable annually once in May 2025, and pays a 4.85% coupon. The note is led by Nomura and was announced Apr 26. Note that IBRD has done six trades in fixed callables totalling $370m so far this month, across a range of leads (see Total Derivatives for more deals).


    New issues

    • KfW plans a $1bn short 2y EMTN at swaps +12bps. Leads are BofA, BMO (B&D) and TorDom.


    • Italian government agency CDP (BBB/BBB) plans a USD 3y at around Treasuries +215bps through BNPP, BofA, Citi (B&D), GS, HSBC, IMI-Intesa Sanpaolo, JPM, MS and SocGen.


    • State Bank of India (BBB-) is preparing a USD 5y at around Treasuries +185bps through Citi (B&D), ENBD, HSBC, JPM, MUFG and StanChart.


    • 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) yesterday priced a $1.25bn short 5y at Treasuries +280bps. Leads are ICBC, IMI and JPM (B&D).