EURi: Long forwards test highs as BTPei-39 priced

Long forwards test new highs as BTPei-39 priced

The arrival of €4bn in new 15y BTPei-39 failed to prevent long inflation forwards hitting new highs for the cycle today. EUR 10y10y tested 2.815% on the screens before ending around 2.80% (+2.75bps) while EUR 15y rose to 2.565% (+2.75bps) as the curve bull-flattened.

Traders had speculated last week about the timing of a new BTPei (mixed with discussion of new OATi, see Total Derivatives) and the 15y bond gathered a €23.8bn book with a 2.439% real yield, to give 27bps over the BTPei-33.

Dealers away from the lead quartet of Barclays, Citi (B&D), DB and JPM judged that the new bond had come out “a bit cheap” today after long end BTPei were “mainly offered” yesterday following the announcement. They added that iotas in that area of the curve tightened today.

As for the buyers, traders hadn't seen much client interest on asset swap (although they were not in the quartet) but they did cite real yield buying generally for the continued strength of long end inflation forwards.

Core real yields fell by 1.5-3.5bps on the day even as nominals sold off a touch, while breakevens widened by 2.5-4bps led by the front end as the inflation curve flattened in cash and swaps. BTPei real yields rallied by a touch more than core with the BTPei-33 outperforming its Italian  neighbours on the day. Traders said that they hadn’t seen the new bond trade on switch.

Inflation trades on the SDR included plenty of EUR 15y (some versus 30y or 10y) including clips reported at 2.54%, 2.545245%, 2.54875%, 2.548%, 2.5475%, 2.517%, 2.555%, 2.5638%, 2.571%, 2.5737% and 2.53%. The swap closed on the screens just off its lunchtime highs.       

New issues: Small Goldman MTN

• Goldman Sachs launched a €5m (max) inflation-linked zero coupon EMTN due 26 May 2027. Coupon and redemption linked to euro HICPx. Self-led.