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

Chart red green numbers 13 Jun 2022
The euro new issuance pipeline continues to grow while ASWs edged tighter. Newswires report Dutch pension fund laws are nearing Senate approval.

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  • Issuance pipe grows; ASWs tighter 
  • Dutch pension fund law eyes approval
  • Hold EUR 10s/30s steepeners - Barclays
  • New issues

    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 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).”


    New issues

  • Italy plans to sell EUR 15y inflation-linked bonds through Barclays, Citi, DB, JPM and SocGen.

  • Robert Bosch GmbH plans EUR 4y, 7y, 12y and 20y after investor calls on 23 May through BNPP, Citi, DB, Mizuho and UniCredit.

  • AFD, Agence Francaise Developpement, plans EUR 10y through CA, DB, HSBC, MS and Natixis.

  • BPCE is pricing €500m (max) 10y NC5 Social Tier 2 at swaps +265bps through Natixis (B&D).

  • Novo Banco plans €400m 10.5y NC5.5 Tier 2 after investor calls on 22 may through BofA Citi, CA, CS, JPM and SocGen.

  • Bayer AG plans EUR 3.25y, 6.25y and 10y after investor calls today through BofA, Citi and DB.

  • Merlin Entertainments, a UK theme park operator, plans €650m 7y NC3 Senior Secured after investor calls today through DB (B&D), BofA, Barclays, HSBC, Mizuho, Santander, SMBC Nikko UniCredit and IMI.

  • Mercedes-Benz International Finance is pricing €1bn (max) Green 3y at swaps +20bps and €1bn (max) 8y at +65bps through BayernLB, Commerzbank, LBBW, SEB, SocGen and UniCredit (B&D).

  • Erste is pricing €500m 7y NC6 Senior Preferred at swaps +125bps through BBVA, Citi, Commerzbank, Erste (B&D), SocGen and UniCredit.

  • TVO Oyj plans EUR 7y after investor calls today through Danske, NatWest, Op and SEB.

  • Legrand plans EUR 6y SLB investor calls today through CA and GS.

  • WPP Finance, a UK advertising company, is pricing €750m 5y at swaps +110bps through Barclays, Citi, GS (B&D), JPM and WFS.

  • CDC plans €500m (max) 5y Sustainability-linked bonds through BNPP, CA, DB, JPM and La Banque Postal.

  • KBC Bank is pricing €750m 5y Covered at swaps +15bps through Commerzbank, HSBC, KBC, Natixis, Santander and UBS.

  • Werfen SA plans €500m 5y after investor calls on 23 May through BBVA, BNPP, Caixa and HSBC.

  • Lloyds Bank Corporate Markets is pricing €750m 4y around swaps +95bps through Lloyds (B&D), ABN Amro, CA, DB and GS.

  • Akita Bank plans €500m (max) 4y Covered through Danske, DZ, Erste, LBBW and Nordea.

  • Raiffeisenbank Austria (Croatia) plans €300m (min) 4y NC3 after investor calls on 22 May through GS, Raiffeisenbank and SocGen.

  • Swedbank is pricing €750m 3y NC2 SNP at swaps +110bps through GS, JPM, Natixis, Swedbank and UBS.

  • Equitable Bank may sell €500m (max) 3y Covered bonds on 23 May through Barclays, DZ LBBW, Scotiabank and TD.

  • Van Lanschot Kempen plans €500m (max) 3y Covered through BNPP, DZ ING, LBBW and Rabobank.