EUR Swaps: Front-end profit taking; Spreads wider

Deflated balloons field 21 Jun 2021
Signs of a US debt deal and lower than consensus Spanish inflation helped to support euro fixed income.

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  • Front-end profit taking; Spreads wider
  • Dutch parliament to vote on pensions
  • Listen to the ECB - SocGen
  • New issues

    Front-end profit-taking; Spreads wider
    Signs of a US debt deal with enough bipartisan support to suspend the debt limit, see USD Swaps, has helped to support global fixed income. In Europe, weaker-than-consensus Spanish inflation also lifted the market higher after harmonised CPI printed at 2.9%yoy vs 3.3%, down from 3.8% the previous month.

    The 10y Bund future was last trading around 60 ticks higher while the 10y yield has declined by -5.5bps to 2.38%. Elsewhere, the Euro Stoxx has edged +0.2% higher.

    In the front-end, red Euribors have rallied up to +12bps while ECB €STR Sep has declined by -2.1bps to 3.688% last. “We moved quite fast (higher) and so fast money are likely profit taking,” felt one trader.

    In swap spreads, the front-end of the curve is wider despite signs of the US reaching an agreement on the its debt. “It is a bit surprising perhaps… But then the underlying is rallying a bit,” one trader pointed out.

    Last Bund ASW prices were Schatz at 80.5bps (+2.6bp), Bobl at 73.6bps (+0.8bp), Bund at 68.4bps (+0.4bp) and Buxl at 29.7bps (+0.4bp).


    Dutch parliament to vote on pensions
    According to newswire, the Dutch Senate is expected to vote “late on Tuesday evening” on the new pension law. For further details, please see here


    Listen to the ECB - SocGen
    In its latest rates weekly Societe Generale recommends listening to the ECB and notes the market has also began scaling back its rate cut expectations. It writes:

    • "The market has started listening to the ECB’s talk and is not only again considering an ECB terminal rate above 3.75%, but has also scaled down its rate cut expectations, in line with our recommendations.

    • "The repricing has re-steepened the EUR 1-2y and flattened the 5-10y and 10-30y spreads. In line with the 1-2y steepening, the 2-5-10y fly moved up. The 2-5y slope has preserved the flattening trend, inverting below -45bp. We recommend keeping 2-5y flatteners, targeting levels below -50bp and even as low as -60bp.

    • “EUR 2-5y flatteners are now a relatively safe carry trade. The very front end and the 2-5-10y fly will end up moving down again. In the late stage of the cycle, the front end of the curve continues flattening, and the long end is first to steepen, so the belly is outperforming the wings. Our curve recommendations therefore remain unchanged.”

    New issues

  • Societe Generale is pricing EUR 4y Senior Preferred around swaps +120bps and 10y Tier 2 around swaps +300bps. Self-led.

  • CA Home Loan SFH is pricing EUR 10y Social Covered around swaps +37bps through BBVA, CA (B&D), Erste, Helaba and NordLB.

  • 2i Rete Gas SpA is pricing €500m 10y around swaps +175bps through Barclays, BNPP, BofA, GS (B&D), IMI, JPM, Mediobanca, MS, SocGen and UniCredit.

  • Statnett plans to sell €500m (max) 10y Green after investor calls on 30 May through Barclays, BNPP, NatWest and SEB.

  • KBC is pricing EUR 3y NC2 around swaps +115bps and 8.5y Social around swaps +165bps. Leads are ABN Amro, BNPP, BofA, Citi, CA, DB and KBC.

  • MUFG is pricing €500m (max) 8y NC7 around swaps +195bps through MS and MUFG (B&D).

  • Bouygues SA is pricing EUR long 8y around swaps +125bps through CA, Natixis (B&D), SocGen, BNPP, CIC and HSBC.

  • Kexim, Export-Import Bank of Korea, is pricing EUR 3y around swaps +37bps and 7y Green around swaps +77bps through Citi, CA, HSBC (B&D), ING, JPM and SocGen.

  • Sabadell is pricing EUR 6y NC5 Green Senior Preferred around swaps +230bps through Sabadell, BofA, CA, DB, HSBC and ING.

  • Zuercher Kantonalbank plans €500m (max) 6y NC5 Bail-in bonds after investor calls on 30 May through BNPP, DB and UBS.

  • Luminor Bank plans €300m (max) 4y NC3 Senior Preferred through Commerzbank, DNB and JPM.

  • ASML NV is pricing EUR 2.5y around swaps +30bps through BofA, Citi (B&D), Commerzbank and SMBC.

  • Bank of Montreal is pricing EUR 2y FRN around 3mE +60bps through BMO, BNPP, DB, Natixis and Nomura.