EUR Swaps: Tracking USTs; Big supply arrives
Tracking USTs; Big supply arrives
The Bund future posted gains for much of today’s session although took a hit and followed US Treasuries lower following mixed US data, see USD Swaps.
“It feels very driven and sensitive to US price action at the moment,” said one euro trader. The 10y Bund future was last down 5 ticks while the 10y yield was marked around 2.31% (unch). The EuroStoxx was last +0.1% while the 10y BTP/Bund spread was unchanged at 187bps.
In euro swaps traders say the focus has been on a huge number of new issues pricing this week. In sovereign supply Belgium is pricing €4bn 20y at swaps +54bps through syndication, “Possibly there’s a bit of asset swap demand and there was a bit more paying flow but overall flows have been quite balanced,” one trader away from the leads reported.
Meanwhile, swap spreads across the 5y to 30y sector are slightly tighter for a second session as a number of banks and other SSAs including KfW and EIB price new deals. Among those targeting the 10y sector are BNPP €1.25bn 10y, Santander €1.25bn 10.25y NC5.25 and HSBC €1.75bn 10y NC9. KfW and EIB priced a total of €8bn in 7y
Last Bund ASW prices were Schatz at 81.5bps (+0.2bp), Bobl at 73.5bps (-0.4bp), Bund at 68.7bps (-0.5bp) and Buxl at 32.5bps (-0.5bp).
Elsewhere, 3s6s basis has eased back after moving sharply higher yesterday with 5y last marked -0.5bp at 7.35bps and 10y -0.15bp at 2.95bps.
Long-end steepening bias - JP Morgan
In its latest rates weekly JP Morgan holds a long-end steepening bias in the euro curve. It writes:
- "At the long-end of the curve, we keep our medium-term 10s/30s swap curve steepening bias and hold 5y5y/15y5y swap curve steepener as a proxy to 10s/30s. We had rotated our recommendation of 2y2y10y10y swap curve steepener as a proxy to 10s/30s into
5y5y/15y5y on RV considerations.
- "The 5y5y/15y5y swap curve has steepened around 3bp over the week versus 1.5bp steepening of the 10s/30s curve. The residual has partly corrected but the proxy still appears to be marginally too flat versus 10s/30s. We keep 5y5y/15y5y swap curve steepener as a proxy to 10s/30s on RV considerations) and thus we keep this trade. We also stay in 10s/30s conditional bull-belly richener implemented via 3m receivers.”