GBP Swaps: Strong syndi survives US data; Gilts outperform!

Gilt edged
US data kyboshed a gilt rally today, but not gilt outperformance versus Bunds or the successful 2063 syndication.

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


  • Good syndi survives US data; Gilts outperform!

  • DMO: 2063 success a local affair

  • New issues: ABN, CDC


Strong syndi survives US data; Gilts outperform!

Unsettlingly hearty US retail sales, manufacturing and industrial production data this afternoon kyboshed a gilt market rally but didn’t stop a rare gilt cross-market outperformance on a day when rumours of the death of LDI demand for long-end gilts was seemingly proven to have been exaggerated.


The good, resilient, folk of the DMO were deemed to have given another new-born gilt a good start in life (with the tender help of Goldman, HSBC, Nomura, RBC and the B&D Morgan Stanley) as the slightly larger-than-expected sale (the new 2063 weighed in at fully £5.5bn) attracted a strong order book.


The deal was priced at 4.1194% at 1:05pm (+6.5bps to the 2065) and at the 4:15pm close had sold off a couple of bps which, in the context of a day of wide ranges, was a good outcome.


One market participant close to the sale said that the order book of £54.2bn was “a very solid order book and overall it was a strong syndication, above the average (bid/cover) for this type of maturity… the team – led by Morgan Stanley – did a top job in what are still unusual times.”


Gilts started on a high today as pleasingly weak employment UK data saw gilts actually do better than Bunds and USTs, something that persisted for the day. Both the data itself and the subsequent relative gilt strength seemed to have a whiff of the elusive ‘pivot’ that wannabe inflation doves have long been waiting for.


So much so that at 9am in London the 2y gilt yield was 10bps lower on the day at 3.72%, before a period of stabilization became a steady seep higher by gilt yields as US data warned us all that there will be many false dawns and siren songs to be endured before inflation is in nailed-down retreat. In the US and elsewhere.


Still, those who have turned towards the idea of gilt-Bund spread narrowing (see RBC yesterday GBP Swaps: Busy Monday?), will have been thrilled to the core by today’s gilt move. At the close the ever-so topical 10y gilt/Bund spread was 4.5bps tighter at a still very-high 146bps, which is a definite step in the right direction for those backing a sea-change.


And at that 4:15pm final gong today, 2s/10s was about a bp steeper at 1.2bps and 10s/30s rose to by about the same to 44.1bps,having flattened a touch from opening, pre-syndi steeps. In ASWs the 5y is +0.2bps at 26.2bps, 10y is unchanged at -13.4bps and the 30y is -0.3bps at -58.7bps. Despite the arrival of fresh long-dated nominal supply, 30y breakevens finished around 3bps tighter.    


DMO: 2063 success a local affair

The DMO announced this afternoon that today’s syndicated launch of £5.5bn (nominal) of 4% Treasury Gilt 2063 has been priced at £97.661, equating to a gross redemption yield of 4.1194%.


Looking at the buyside the DMO said that the UK domestic market provided the main support for the issue, taking around 92% of the allocation. Commenting on the result, Sir Robert Stheeman, the Chief Executive of the DMO, said: “Today has seen a further demonstration of strong market support for our syndication programme with a very successful launch, in large size, of a new long gilt, which is set to become the next benchmark at the 40-year maturity point.”


“Again we have also seen a smoothly executed transaction, which reflects well on the Joint Bookrunners and also another strong show of quality participation from our key investor base, with almost 200 individual orders. I remain both impressed with and grateful for the ongoing and constructive commitment from all parties we have seen on this transaction, and in particular those who provided valuable feedback in advance of this morning’s launch. I look forward to such support continuing as we progress with the delivery of our financing remit for 2023-24”.


New issues: Royal London, ABN, CDC

  • Just missing the marketing opportunity offered by the Coronation, insurer Royal London plans a GBP perp NC10.5 RT1 CoCo (Baa3/BBB) via BNPP, BofA and HSBC. 


  • ABN Amro has just priced a £750m 3y Green bond at gilts +160bps via itself (B&D), Goldman, HSBC and Lloyds.


  • Caisse des Depots et Consignations has priced a £325m 2.25y  bond at gilts +76bps via HSBC, NatWest and RBC (B&D).