USD Swaps: USTs dive; IG issuance duration-heavy; ISM worries

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Heavy corporate issuance, a resolution to First Republic and higher ISM prices paid combined to sink USTs lower. Swap spreads widen a touch.

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  • USTs dive; IG issuance duration-heavy; ISM worries

  • New issues


    USTs dive; IG issuance duration-heavy; ISM worries

    Treasuries lost altitude as several factors added pressure today. 1) First Republic was sold to JP Morgan, eliminating a measure of risk that the market had been pricing in for the demise; 2) ISM prices paid rose more than expected; and 3) A heavy long duration corporate slate hit the markets with both Meta and Comcast issuing a combined total of $7.25bn in 30y and 40y tranches for their $8.5bn 5-part and $5bn 4-part offerings, respectively today.


    With this backdrop, Treasury yields are last anywhere from 11 to 14bps higher on the day. The 10y note yield is last 3.572% or 13.9bps higher on the day while 2s10s USTs is last 1.7bps steeper at -56.8bps. Equities closed with small losses (DJIA -0.14%, S&P -0.02% and Nasdaq -.11%). Meanwhile, Europe and the UK were closed out for May Day today and a source described that a "herd mentality" of trading has seen participants "piling in" on the daily rate trends as they pretty much don't reverse out intraday.  


    As for the ISM readings, analysts at Barclays find that “today's readings suggest that weakness in manufacturing is persisting, with new demand weakening, the restocking dynamic having run its course, and backlogs steadily receding” but “this is not translating to disinflationary pressure, with costs having leveled in recent months.”


    Meanwhile, “the input price index ascended to 53.2 in April, the second positive reading in three months” and “although some of this firming likely reflects stabilizing in the volatile energy prices component from mid-March, broader trends are not encouraging,” Barclays suggests. “These renewed cost pressures have coincided with an upturn in core goods prices in both the CPI and PCE price indices, following the deflation late last year” and this is “a worrisome development, with much of last year's disinflation having been driven by goods prices, and less-than convincing evidence that service prices are poised for sustained deceleration,” Barclays assesses.


    Elsewhere, with the IG deals today were not swap candidates, and swap spreads widened out a touch versus the underlying UST selloff. The illiquid 20y swap spread led the widening today amid mixed volumes.  As for IG new issuance, a total of $22.6bn priced, with the large multi-tranches from Meta and Comcast leading the volumes for the day.  


    2s +0.25bps (-0.5bps), 3s -11.25bps (-0.5bps), 5s -19.25bps (+0.5bps), 7s -26.5bps (+1.5bps), 10s -26.375bps (+1.25bps), 20s -62.625bps (+2.25bps), 30s -69.375bps (+0.625bps).



    New issues  

    For a complete review of issuance over the past week, please go to USD New Issues.


    • CenterPoint Energy Resources priced a $300m 5.25% 2028 reopening. Leads Barclays, GS, JPM and WFS. A3/BBB+/A-. +100bps. Total outstanding now $600m.


    • Comcast priced a $5bn 4-part ($1bn long 5y, $1bn 10y, $1.6bn 30y and $1.4bn 41y). Leads GS, MS, SMBC and WFS. A3/A-/A-. +95bps, +125bps, +155bps and +170bps.


    • Meta Platforms priced a $8.5bn 5-part ($1.5bn 5y, $1bn 7y, $1.75bn 10y, $2.5bn 30y and $1.75bn 40y). Leads BofA, JPM and MS. A1/AA-. +95bps, +120bps, +135bps, +177bps and +192bps.


    • HCA Inc. priced a $3.25bn 3-part ($1bn 5y, $125bn 10y and $1bn 30y). Leads BofA, Citi, JPM and WFS. Baa3/BBB-. +160bps, +193bps and +233bps.


    • Georgia Power priced a $1.75bn 2-part ($750m 5y and $1bn 10y). Leads BofA, MS, MUFG, PNC, Scotia, TSI and WFS. Baa1/BBB+/BBB+. +105bps and +140bps.


    • Northern States Power priced a $800m 30y FMB. Leads BMO, CIBC, Citi, Mizuho and USB. Aa3/A/A+. +135bps.


    • Healthpeak LLC priced an upsized $350m 5.25% 2032 reopening. Leads Barclays, Mizuho, RBCCM, TD and WFS. Baa1/BBB+. +190bps. Upsized from $300m.


    • GATX priced a $400m 10y. Leads BofA, Citi, MS. Baa2/BBB. +190bps.


    • Avolon Holdings priced a $750m 5y. Leads BNPP, DB, FTB, JPM and MUFG. Baa3/BBB-/BBB-. +300bps.


    • Hershey priced a $750m 2-part ($350m 5y and $400m 10y). Leads BofA, Citi, JPM and RCBCM. A1/A. +67bps and +97bps.   


    • Tractor Supply priced a $750m 10y. Leads TSI, USB and WFS. Baa1/BBB. +175bps.