USD Swaps: Dicey pre-FOMC set-up; Regional banking pressures resume

Prices chart 11 Oct 2021
Regional banks saw selling pressures and yields dove lower ahead of tomorrow's FOMC. IG priced $5bn. Swap spreads bounced off the day's lows.

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  • Dicey pre-FOMC set-up; Regional banking pressures resume

  • New issues


    Dicey pre-FOMC set-up; Regional banking pressures resume  

    Treasuries climbed higher this afternoon with yields dropping anywhere from 9.5bps to 17.5bps, with the belly leading the rally. The 10y note yield is last 14bps lower at 3.42% while 2s10s is last 2.6bps steeper at -55.2bps. The latest focus of regional bank sales, PacWest and Western Alliance ended the session -25.6% and -14.8%, respectively, after seeing intraday losses of up to 42% and 27.2%. Equities overall ended down (DJIA -1.02%, S&P -1.14% and Nasdaq -0.99%). The KBW Banking index fell 4.3%. 


    Reflecting on the latest round of banking stress, one trader described the current environment as “GFC 2.0” and that it is difficult to see a good way out of the current morass “which is the scary part.” With JP Morgan buying First Republic yesterday, and the additional pressure on regional banks, the source joked that in the end there might only stand one bank – “mono” bank – the way it appears to be going.


    Swap spreads narrowed in amid the initial dive lower in yields, but have since stabilized and rebounded off the mid-morning lows. Overall were above average volumes for the bulk of the swap curve. As for issuance, a total of $5bn priced in IG – with the $4bn 2-part from Barclays making up the bulk of the volume, and was likely swapped.


    As for the Fed, the majority see 25bps, although the probability priced in the futures dropped to 78.7% from 93% yesterday, and today's latest round of regional bank weakness so soon after First Republics sale is an unwelcome set up for the meeting (not to mention the closer than expected X date for the debt ceiling announced by Yellen). As usual, the wording and language the Fed and Powell uses in the statement and Q&A will be closely eyed.


    2s -1.25bps (-1.625bps), 3s -12.5bps (-1.25bps), 5s -19.25bps (-0.125bps), 7s -26.5bps (+0.125bps), 10s -26.375bps (-0.375bps), 20s -62.375bps (-0.375bps), 30s -69.25bps (unch).



    New issues  


    • Tenet Healthcare (B1/BB-) plans $1.35bn in 8y NC3 senior secured notes. Leads are Barclays, BofA, CAPONE, Citi, DB, FT, GS, JPM, MS, RBC, Santander, Truist and WFS. Price talk 6.5% -6.75%.


    • Glencore (Baa1/BBB+) launched a $1bn 2-part ($500m 5y and $500m 10y). Leads DBS, HSBC, JPM, MS and Santander. +195bps and +230bps, respectively. It dropped plans for a 3y.


    • Barclays (Baa1/BBB) priced a $4bn 2-part ($2bn 4y NC3 and $2bn 11y NC10). Self-led. +215bps and +280bps.


    • SK On (Aa3) priced a $900m 3y Green bond guaranteed by Kookmin at Treasuries +155bps. Leads are BNPP, CA, HSBC (B&D), JPM, MUFG and StanChart.