USD Swaps: Strong bull steepening unfolds; 10y tails

Bull Statue
The front end propelled higher as additional buying surfaced this afternoon, sending yields double-digits lower and the curve steeper. 10y tails.

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  • Strong bull steepening unfolds; 10y tails  

  • New issues


    Strong bull steepening unfolds; 10y tails  

    The UST rally has seen further momentum this afternoon, with UST yields anywhere from 4.5 to 12bps lower on the day, in a strong bull steepening move. The 10y note yield is last 7.9bps lower at 3.443% while 2s10s has steepened out 3.6bps to -47.11bps and 5s30s is last 7.5bps higher at 41.75bps – a 13 month high.


    Equities are ending mostly higher (DJIA -0.08%, S&P +0.62% and Nasdaq 1.04%) and regionals have continued to see smaller moves (PacWest -2.6% and Western Alliance +1.97%)


    As for the second leg of the refunding, the $35bn 10y auction tailed by 0.8bps, drawing a rate of 3.448%, but the underlying stats were stronger. Indirects rose (67.5%) while directs dropped a bit (19.5%) and primary dealers ended with a small allocation of 13%. the 2.45x bid-to-cover was stronger.


    Meanwhile, swap spreads saw a rather confined range of around 1bp across the curve, with spreads coming off the wides seen earlier in the session to end slightly wider in the belly and long end versus a continued softening in the front end - amid mixed volumes . On the IG new issuance supply side, a total of $3.1bn priced across four issuers, led by a $1.1bn 10y by Foundry JV Holdco. The weekly total for IG (ex-SSA) is now above $30bn.


    Elsewhere, looking at the details of today’s CPI print, analysts at BNP Paribas called the drop in core services ex-shelter (5.2% y/y, 5.7% prior) “an impressive moderation” and one that “is a critical signal to monetary policymakers that easing labor pressures are factoring through to the consumer price basket.”


    Thus, BNP Paribas believes that although inflation “continues to run hot,” it suggests that “the increasingly well-defined peak in core services (and core services ex-shelter) should be welcome news to policymakers looking for further justification to pause rate increases and assess incoming information.”


    2s -7.75bps (-1.25bps), 3s -11.5bps (+0.375bps)*, 5s -19.5bps (+0.5bps), 7s -26.25bps (+0.375bps), 10s -27.75bps (+0.25bps), 20s -64.625bps (+0.25bps), 30s -71.5bps (+0.625bps).


    *adjusted for the 3bps give.



    New issues  


    • BNG Bank is working on a 5y social bond via CA-CIB, Citi, Daiwa and RBC.  Aaa/AAA/AAA.  Price talk: MS + 48bps area. Expected to price tomorrow.


    • LyondellBasell has mandated ING and Morgan Stanley for a series of ESG fixed income calls commencing May 11th.


    • Foundry JV Holdco LLC priced a $1.1bn 10y deal via BNPP, BMO, SMBC, TD and WFS.  A3/A-.  +260bps.


    • Willis North America priced a $750m 10y benchmark. Leads BofA, Barclays and PNC.  Baa3/BBB+. +195bps.


    • Edison International priced a $600m 5.5y benchmark via MUFG, MIZ and PNC.  Baa2/BBB-/BBB.  +1900bps.


    • Ryder priced a $650m 5y benchmark. Leads MUFG, MS, PNC, USB and WFC.  Baa2/BBB+/BBB+. +190bps.