USD Swaps: Outsized selloff amid higher equities; 7y tails

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UST yields climbed double digits in the front end amid strong gains in equities. The 7y auction tailed. Front end spreads tighten. IG priced $4bn.

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  • Outsized selloff amid higher equities; 7y tails

  • New issues


    Outsized selloff amid higher equities; 7y tails

    Treasuries have spilled lower this afternoon in a bear flattening move. The 2y note yield is back at 4.082% or 13.3bps higher on the day while the 10y note yield is last 7.9bps higher in yield at 3.526%. Equities closed higher (DJIA +1.57%, S&P 1.93% and Nasdaq +2.43%). First Republic saw a bounce (+7.5%), but sources warn that the headline risk surrounding First Republic and other regional banks remains high.


    With the 10y note yield closing in on the top end of the recent range at around 3.60%, one source noted that the top “has held since mid-March,” with the probes lower in yield a result of various banking troubles (CS at the beginning of April and then First Republic more recently). With this backdrop and economic data looking anemic, especially on the manufacturing side, the trader questioned “how much higher can the 10y yield go?” as it’s been “a decent 30bps range for a while” and is “difficult to see it going much higher than 3.6%.”


    Meanwhile, the last leg of the refunding supply -the $35bn 7y - tailed 0.8bps versus the 1pm bid side, drawing a rate of 3.563%. The stats were relatively copacetic, however, as higher indirects (64.1%) offset a small drop in directs (21.1%) and left primary dealers with a slightly lower 14.8%. The bid-to-cover was higher at 2.41x.


    Swap spreads saw the front end of the curve dive in lower versus while belly and back end spreads were stable to a touch tighter amid lower than average volumes. IG new issuance priced just over $4bn, led by a $2.45bn 4-part reopening. Week to date for the final week of April stands at just under $17bn with the MTD at $65.7bn.


    Looking at tomorrow’s slug of data, one trader reckoned that some market participants are likely squaring up ahead of the releases and that the m-o-m PCE deflator number would be closely eyed.


    Currently, SOFR swaps - 2s +0.25bps (-2.625bps), 3s -11.75bps (-1.875bps), 5s -20.875bps (-0.125bps)*, 7s -29bps (-0.625bps), 10s -28.625bps (-0.125bps), 20s -65bps (-0.625bps), 30s -70.625bps (-0.25bps).


    *adjusted for the 0.5bps give.



    New issues  


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


    • 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.  


    • Italian government agency CDP (BBB/BBB) priced a $1bn 3y at Treasuries +200bps through BNPP, BofA, Citi (B&D), GS, HSBC, IMI-Intesa Sanpaolo, JPM, MS and SocGen.


    • Philip Morris priced a $2.45bn 4-part tap ($450m 4.875% 2/26, $550m 4.875% 2/28, $700m 5.125% 2/30, $750m 5.375% 2/33). Leads BBVA, GS and WFS.  A2/A-/A.  +90bps, +115bps, +145bps, +165bps.


    • Anglo American priced a $900m 10y benchmark via HSBC, GS, BMO and Scotia.  Baa2/BBB+/BBB+.  +205bps.


    • Constellation Brands priced a $750m 10y benchmark via BofA, GS, JPM an d WFS.  Baa3/BBB. +147bps.


    • State Bank of India (BBB-) priced a $750m 5y at Treasuries +145bps through Citi (B&D), ENBD, HSBC, JPM, MUFG and StanChart.