EUR Swaps: Rally extends after inflation misses; Dutch pension reform impact

Puncturing balloon 21 Jun 2021
The rallying momentum continued in euro fixed income after more inflation data printed weaker than expected.

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


  • Rally extends after inflation prints
  • Rabo: Dutch pension reform impact
  • New issues

    Rally extends after inflation prints
    Weaker-than-expected euro inflation data kept the rallying momentum going in euro fixed income today. Among the latest prints, German HICP came in at 6.3%yoy vs 6.7%yoy consensus and down from 7.6%yoy the previous month. Still, inflation swaps have come back from opening lows with EUR 1y1y down just 3bps at 2.25% while longer forwards such as EUR 5y5y are little-changed at 2.53%.  

    The Bund future rallied over a point although has since pared earlier gains and was last up around 60 ticks while the 10y yield was last marked around 2.29% (-5.5bps).

    In the short-end, reds rallied up to +12bps but have since retreated to +7bps higher. “Volumes haven’t been that massive,” reported one trader earlier today, with Sep23 EURIBOR trading 153K and swap flows mixed, judging by SDR data. Elsewhere, some reported that fast money were taking profit on shorts during yesterday’s session.

    Meanwhile Bund asset swap spreads are wider across the curve, led by the front-end with the futures rolls starting. “It’s pretty mechanical with the rally,” explained one trader, “But we expect to see a bit more receiving as (new issue) deals get priced in the afternoon,” he added.

    Last Bund ASW prices vs 6mE were Schatz at 82.1bps (+1.9bp), Bobl at 75.3bps (+1.1bp), Bund at 69.9bps (+1.1bp) and Buxl at 31.6bps (+0.9bp).

    Across the swap curve, the long-end has seen sharp steepening with 10s/30s last +3bps at -36bps.

    Elsewhere, the Dutch parliament yesterday passed legislation to reform its pension laws, see below. “All things equal, we could see some steepening around 2027… But nobody is going to put on a position now for something that could be happening three or four years down the line,” argued one trader.


    Rabo: Dutch pension reform impact
    The Dutch parliament yesterday passed new pension legislation to be effective from 1 July, 2023. Meanwhile the deadline for changes to be implemented was recently extended by one-year, from January 2027 to January 2028. For more details on the Dutch Senate’s approval, see

    In a Rabobank strategy note published today, the bank discusses the possible market impact:

    • “In our view the most prominent impact of the new regulation will be on how pension funds hedge their interest rate risk. Up to the reforms we expect strong demand for hedging, especially when we get closer to the dominant transition dates of 2026 and 2027. The top three pension funds in assets under management, which hold approximately 50% of total assets, are likely too big to temporarily increase their hedges (significantly) which should limit the market impact. Nonetheless we expect continued demand for (long) hedging up to these transition dates. On a sector level the DV01 is currently approximately 1,250m01. In our view ceteris paribus this can potentially get pushed up by 100m01 and possibly higher. Pension funds will want to hedge shorter on the curve where possible to limit the impact of the changes of the reformed regulation.

    • “With respect to the changes due to the new regulation, pension funds have already been making adjustments where possible. If possible within their mandate, they are already moving shorter on the curve for all new swaps. The current regulation still applies to pension funds which means they have limited room to re-adjust the matching portfolio in advance without creating a significant mismatch risk (with liabilities). We expect pension funds will start to implement most of their changes around and mostly after the reforms and over time.

    • “Ideally pension funds want to make as few changes as possible and reduce the duration of the portfolio over time. This will likely not be enough and will require some additional selling of long duration and buying additional short duration which could result in curve steepening after the transition dates. Mainly due to the reduction in duration, we expect that this will go down by approximately 100m01 up to 300m01 (compared to current levels) after the reforms.”


    New issues

  • Land NRW is pricing €2bn 10y Sustainable at swaps +3bps through CA, Erste, ING, JPM, NatWest and Nordea.

  • Rabobank is pricing €750m 10y Covered at swaps +18bps through Barclays, Citi, DB, Natixis, NatWest and Rabobank.

  • Arkea Home Loans SFH is pricing €1bn long 10y Green Covered at swaps +33bps through ABN Amro, CA, CMA, DZ, Nykredit and Santander.

  • Slovak Republic plans EUR 10y through Citi, KBC, HSBC and Raiffeisen.

  • Hong Kong is pricing EUR Green 4y at swaps +30bps and 9y at +90bps. Leads are CA, HSBC (B&D), Citi, JPM, BNPP, BofA, MS and UBS.

  • IDB Invest, Inter-American Investment Corp, is pricing €500m (max) 7y at swaps +21bps through DB, DZ, HSBC and TD.

  • 3i Group plans €500m 6y through Barclays, DB and ING.

  • Ibercaja Banco SA is pricing €500m 4y NC3 at swaps +245bps through BofA (B&D), DB, JPM and MS.

  • Luminor Bank is pricing €300m 4y NC3 at 7.75% through Commerzbank (B&D), DNB, JPM and Luminor.

  • CA Auto Bank SPA/Ireland is pricing €500m 3y at swaps +120bps through CA (B&D), BBVA, BofA, Citi, ING, Mediobanca and UniCredit.

  • Nationwide BS is pricing €500m 2y FRN at 3mE +50bps through DB and Lloyds (B&D).