USD Swaps: Front end buying recedes; 30y strong

Chart lines
The early bid did not last and the curve shifted from steepening to flattening. Source scratch their heads over recent strong front end buying.

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  • Front end buying recedes; 30y strong

  • New issues


    Front end buying recedes; 30y strong

    The Treasury curve seesawed from bull steepening to bull flattening as the front end gave back the majority of post-PPI gains of up to 10bps lower and end just 1bps lower while the back end bid has proven more resilient, helped on by a strong 30y auction result, with yields up to 5bps lower. The 10y note yield is last 4bps lower a 3.39% while 5s30s is last 2bps flatter at 39bps. Equities close mixed (DJIA -0.66%, S&P -0.25% and Nasdaq +0.18%). On the regional banking side, PacWest shares ended -23.4% while Western Alliance dropped 1.46%.


    The $21bn 30y auction result came 1.9bps through the 1pm bid side, drawing a rate of 3.741%. Indirects were again stronger (72.4%) while directs dropped (17.4%) and primary dealers’ allocation was lower at 10.2% versus last month. The bid-to-cover was slightly firmer at 2.43x.


    As for the propensity for the front end to fly higher in the past couple of days, one trader was a bit perplexed: “Why are we rallying so much? Why is there a panic move? Maybe it’s because some thing that the regional banking situation is still not in the clear? It is a very strange market,” he assessed.  


    Meanwhile, swap spreads narrowed into the afternoon amid mostly lower volumes – with exception of the wings. IG new issuance volumes (ex-SSA) petered lower with only $2.8bn priced across two issuers – Texas Instruments and EIDP. In addition, on the SSA side, a likely swapped deal from BNG priced ($1.5bn 5y).


    2s -7.875bps (-0.25bps), 3s -12.375bps (-1bps), 5s -20bps (-0.5bps), 7s -27bps (-0.375bps), 10s -28bps (-0.75bps)*, 20s -65.25bps (-0.75bps), 30s -71.875bps (-0.25bps).


    *adjusted for the 0.6bps give.



    New issues  


    • Mamoura has set final terms for a $1.5bn 2-part ($1bn 10.5y and $500m 30y Formosa). Leads BNPP, Citi, FAB, JPM, StanChart, Barclays, CA-CIB and ENBD.  Aa2/AA.  +105bps, +135bps.


    • EIDP Inc. launched a $1.2bn ($600m 3y and $600m 10). Leads BofA, GS and SMBC.  A3/A/A. +95bps and +145bps.


    • Texas Instruments priced a $1.6bn 3-part ($200m tap of its 4.6% Feb 2028, $200m tap of its 4.9% Mar 2033 and new $1.2bn 40y). Leads JPM, MS and USB.  Aa3/A+.  +67bps, +102bps, +137bps.


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