USD Swaps: USTs rally; FDIC bank fees proposed; 30y auction view

JP Morgan 30 Jan 2023
USTs are rallying after this morning’s data and amid a risk-off move as higher FDIC bank fees are proposed. JPM previews 30y auction.

Start a free trial to read this article

Join today to access all  Total Derivatives content and breaking news. Already a subscriber? Please Log In to continue reading.

Or contact our Sales Team to discuss subscription options.

Get in Touch
Blurred image of Total Derivatives article content


  • USTs rally; FDIC bank fees proposed; 30y auction view

  • Formosas and ZC callables

  • New Issues


    Click here for SDR USD IRS trades.


    USTs rallying; FDIC bank fees proposed; 30y auction view

    USTs are in rally mode after this morning’s data showed cooling jobs market (i.e jobless claims +264k versus +245k Bloomberg consensus) and easing price pressures (i.e. PPI +0.2% MoM versus +0.3% MoM consensus). 


    As well, news from the FDIC today that the nation’s biggest bank could face billions in extra fees in the wake of the SVB failure (see FDIC) is helping weigh on broader sentiment this session.  Among the smaller regional banks, PacWest is off another 21% while Western Alliance is up a slight 0.23% last  And amid these banking developments, the major domestic equity indices are all in the red (Dow -0.91%, S&P -0.61%, Nasdaq -0.16%).


    Against this backdrop, the benchmark 10y note yield is down 4.2bps at 3.39% while the 5s30s spread back to near unchanged at 42bps after earlier seeing the belly outperform.  Shorter in, red SOFR futures now last a more muted 2 ticks firmer after seeing gains for 5.5 ticks while SOFR swaps spreads are mixed with the spread curve steepening amid below average activity in all but the 2y, 10y and 30y tenors.In the backdrop, IG issuance remains on tap with a potentially swapped 5y SSA deal from BNG Bank on today’s roster.


    Ahead, Treasury will wrap up this week’s refunding with today’s $21bn new 30-year bonds at 1pm, unchanged in size from the last new issue in February, after yesterday’s $35bn 10y auction was well-received (despite a tail).  Heading into today’s supply, strategists at JP Morgan believe that today auction will receive a similar reception and they highlight the following:


      ”… The April auction stopped 0.2bp through pre-auction levels as end-user demand remained at an elevated 88.9%. Notably, foreign takedown declined 8.6%-pts to 11.3%, the weakest since October, while investment manager demand increased 6.7%-pts to 75.3%, the strongest since July.


      “…Since the last auction, 30-year yields are 14bp higher and the 10s/30s curve is about 11bp steeper, trading near the steepest level since March 2022. Locally, this curve appears too steep relative to near-term monetary policy expectations. The WI roll opened at +0.75bp and continues to trade near that level.


      “…Given the recent steepening of the long-end, which appears excessive relative to Fed policy expectations, we believe (today’s) auction is likely to be digested smoothly.”


    Currently, SOFR swaps – 2s -8bps (-0.375bps), 3s -12.125bps (-0.625bps), 5s -19.75bps (-0.25bps), 7s -26.5bps (+0.125bps), 10s -27.375bps (-0.125bps)*, 20s -64bps (+0.25bps), 30s -71.25bps (+0.375bps).


    * adjusted for the 0.6bps give.



    Formosas & ZC callables


    • Citigroup sold a $135m 5y floating Formosa. The EMTN matures May 2028, is not callable and pays O/N SOFR +1.2%. Leads CTBC, Mega, Sinopac and Taishin and announced May 10.



    New issues


    • EIDP Inc. is working on a 3y and 10y benchmark via BofA, GS and SMBC.  A3/A/A.  Price talk: +120bpsa area, +170bps area.


    • Texas Instruments is working on a 5y, 10y and 40y benchmark via JPM, MS and USB.  Aa3/A+.  Price talk: +100bps area, +137.5bps area, +175bps area.


    • Mamoura is working on a $1bn 10.5y and $500m 30y deal via BNPP, Citgi, FAB, JPM, StanChart, Barclays, CA-CIB and ENBD.  Aa2/AA.  Price talk: +105bps, +135bps.


    • BNG Bank launched a $1.5bn 5y social benchmark via CA-CIB, Citi, Daiwa and RBC.  Aaa/AAA/AAA.  Launched at MS +45bps..