EUR Swaps: Issuance up; Dutch PF law eyes approval; PFZW hedge ratio rises

Issuance pipe grows; ASWs tighter
The Bund's early rebound has faded and the contract was last trading 10 ticks with the curve flatter, while the Euro Stoxx was down by -0.3%.

Meanwhile, the euro new issue pipeline continues to grow with over twenty names working on new deals including several banks and corporates, plus AFD plans a new 10y. 

"It's true the pipeline is building up a bit, but there hasn't been a great deal of activity in terms of swap spreads or outright," reported one dealer. 

In sovereign supply, Italy has announced that it plans to launch a new 15y inflation-linked bond through Barclays, Citi, DB, JPM and SocGen. Sources were unable to confirm if the new deal was a likely asset swap candidate (and thus possibly lend some support to longer-dated nominal ASWs).

As for today, Bund asset swap spreads are roughly 0.5bp to 1.25bp tighter across the curve with last prices vs 6mE for Schatz at 80.6bps (-1.0bp), Bobl at 73.2bps (-0.4bp), Bund at 68.2bps (-0.6bp) and Buxl at 31.2bps (-1.2bp).

In basis, 3s6s has edged wider across much of the curve with last prices 2y at 9.2bps (+0.1bp), 5y at 7.6bps (+0.35bp) and 10y at 3.0bps (+0.15bp).

Dutch pension fund law eyes approval
The newswire fd.nl reports that new Dutch pension law is heading for majority approval in the Senate, see here. 

Elsewhere, Dutch pension fund PFZW last week published its annual report and revealed that it was 48.4% hedged against interest rate risk via bonds and swaps at the end of 2022, in line with its benchmark but up from 41.1% at the end of 2021. The fund had €28.2bn in 'active' swaps at the end of 2022 and €44.9bn in passive swaps. The fund had no inflation swaps.

PFZW added that it had received €5.8bn in cash collateral on bilateral trades and had deposited €3.3bn in government bonds on cleared trades.  Further details can be found here. 

Hold EUR 10s/30s steepeners - Barclays
In its latest rates weekly, strategists at Barclays recommend holding onto EUR 10s/30s steepeners. The bank explains:

• “We are holding on to our EUR 10s/30s steepeners (entry at -35bps with current at -33.5bps). The EUR long-end curve remains notably flat by long-term historic standards and relative to its USD/GBP counterparts.

  
  

• “We view the macro backdrop as supportive for further re-steepening, with a gradual shift in focus towards growth risks (in the context of tight financial conditions) encouraging relative outperformance of intermediate-tenor yields versus the long end.

  
  

• “Indeed, the current level of tightness of EA financial conditions has historically been associated with growth slipping into negative territory. We view 10s/30s steepeners as offering more attractive risk/reward than outright bullish duration trades with steepeners likely to remain relatively more protected in any further bond market selloff (as seen over the past week).”

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