Basis: Decent start; KfW awaited; GBP deals

Dam floodgates 9 Nov 2020
Cross currency basis swaps have ticked over happily during a week which should see the deals get bigger tomorrow.

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


  • Decent start; KfW awaited; BP swaps

  • JPM: T-bill supply to be summer driver of basis

  • Flows

  • New issues


Decent start; KfW awaited; BP swaps

A decent, but not exactly hectic start to the week in cross-currency basis yesterday, was mostly enlivened by receiving pressure in the 10-20y part of the cable curve due to a £400m, 15y BP bond, and by Scandi and UK bank issuers in EUR driving 3y to 5y offers in EUR/USD, carried on apace today.


In cable, amid talk of HF payers in the belly of the curve taking advantage of the BP-driven dip, saw that 10y to 15y cable area again push about 0.25bps higher earlier on, before the move faded in the afternoon and cable ended 0.5bps more negative area in a day of bear-steepening that saw the front end dip as much as 0.75bps and the 30y sector head 0.25bps more negative.


The afternoon pricing of a £750m 10y bond from Intesa Sanpaolo probably helped quash the bounce in that busy part of the cable curve, where trades (10y) were reported a few times at -20.75bps as it closed today -0.5bps at -20.875bps.


In the two core issuance markets today the Dutch dam builders, Ned Waterschaps, led the way with a $1bn 5y offering that priced late in the London afternoon and was accompanied by a late pop up to -29.25bps from -29.5bps as day-on-day the 5y EUR/USD ended the day nearly 1bp less negative versus Monday’s close.


Tomorrow though will likely see the week’s biggest deal with KfW’s planned $5bn USD 5y Global. KfW likes to get its basis-swapping done in real time so basis swappers will be keeping a careful eye on that 5y sector as KfW approaches the pricing of its deal, presumably once the European morning session is out of the way.  


JPM: T-bill supply to be summer driver of basis

Looking to the front end of the EUR/USD cross-currency basis curve, strategists at JPM said in their latest global markets report that “ahead, we see the expected large increase in US Treasury issuance of bills to be a significant driver of the basis curve over the medium-term.”


Its UST analysts “expect the treasury to issue around $500-$600bn of bills over the next couple of months after the resolution of debt ceiling and an overall issuance of around $1tn by year-end 2023… The ‘crowding out’ effect of money market funds who use their funds to buy bills leads to widening of cross currency basis is well established and will likely re-assert itself this time around as well.”


“Indeed,” it added, “if we use the 2017-1H28 period as a template when the T-bills outstanding dwindled into year-end 2017 but was followed by rapid increase in issuance, around $350bn of issuance in 1Q18, we see a strong negative relationship between reds xccy basis and change in bills outstanding, after adjusting for the interest rate differentia.”



Basis trades on the SDR can be seen here: Total Derivatives SDR.


New issues


USD new issues:

  • KfW plans a 5y USD Global at SOFR +36bps or so via BMO, Citi and GS. Expected tomorrow.


  • Tokyo Metropolitan Government (A+) has launched a $500m 3y at swaps +8bps through Barclays, Citi, Goldman and MS (B&D). 


  • NedWaterschaps Bank today priced a $1bn, 4% 5y Social Bond at swaps +45bps. Leads are Barclays, BNPP, CIBC and Citi. Aaa/AAA.


EUR new issues:

  • Toronto-based Equitable Bank is pricing up to €500m 3y Covered around swaps +50bps through Barclays, DZ, LBBW, Scotia and TD.

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


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


GBP new issues:

  • Intesa Sanpaolo this evening priced a £750m, 10y Social Bond at gilts +265bps via BofA, Goldman (B&D), IMI, MS and Nomura.  


  • Nordea this afternoon priced a £300m 3y NC2 Green SNP at gilts +190bps. Via DB,HSBC (B&D) and Nomura


  • SEB yesterday sold a £350m 3y 5.595% bond due May 2026 to give gilts +155bps. Leads are HSBC (B&D), Nomura, RBC and SEB.


CHF new issues:

  • BNP Paribas today priced a self-led CHF 225m, Jun 2029 bond at SARON +80bps.


  • NatWest Markets yesterday priced a CHF 250m 5y bond at SARON +108bps. Self-led.


  • Westpac Banking Corp last night sold via UBS CHF290m in 2.0125% June 13, 2030 bonds at mid-swaps + 20bps.


AUD new issues:

  • Credit Agricole this morning sold AUD 900m, of 5-year fixed and floating rate senior preferred Kangaroo bonds consisting of AUD 600m of FRNs at BBSW +160bps and AUD 300m of fixed rate at swaps +160bps. Initial price guidance was +165bps. Leads were CBA, NAB, Nomura, TD Securities and itself.