Basis: Ceiling bounce; EUR issuance on top

Bounce spacehopper 9 Mar 2023
The EUR/USD first break staged a hearty bounce on the US debt vote, while elsewhere EUR issuance is winning.

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  • Ceiling bounce; EUR issuance on top

  • Flows

  • New issues


Ceiling bounce; EUR issuance on top

The front-end of the EUR/USD staged a fairly hearty bounce this morning after last night’s fairly comprehensive vote in the US Congress saw the Biden administration’s attempt to get its debt ceiling plan rubber-stamped pass its first big test.


As the early-June crunch for US government funding approval approaching, the last week of May saw the EUR/USD first break steadily widen from -17bps on May 19 to -24bps last week.


Since the start of this week, as hope of an affirmative vote in Congress grew, the first break has crawled northwards in anticipation, and today, straight from the opening trading bell in Europe, it sprang from its starting position of -21.5bps to -20bps, before subsiding slightly to its current -20.25bps.


“It has managed a bit of a bounce and is sitting pretty much at mid-range for the last quarter or so,” said one swapper this afternoon. “Perhaps if the issue gets fully settled soon it might eye a run towards its recent high of -15bps,” the trader speculated.


And it has been a reasonably busy day for basis swappers as EUR issuance continues to Lord it over its USD rival, with notable contributions to the market today from JPY and CHF cross-border supply.


Looking at the EUR supremacy at the moment, the above swapper said that “outright EUR rates have been doing better than USD lately which is one factor that can swing issuance in that direction, make it better value for USD funders.”


However, the trader noted that the EUR supply from non-EUR issuers has in large part been from companies/institutions based outside of the States. “There are a lot of moving parts obviously, and if EUR to USD is working well then that’s a good start for borrowers looking to end up in non-USD currencies, but it isn’t that easy to find a single reason why EUR works for people looking to swap back to sterling or elsewhere.”


And talking of GBP, KfW sold a £300m tap of an April 2025 bond yesterday but there hasn’t been supply in that market since, though cable basis has been disproportionately busy. In addition to 3y flows at -19.25bps this morning that might possibly have been  lingering KfW deal flow, traders said the long end was again active with a number of 30y trades going through at -41bps earlier (now -40.25bps) and at -38bps in 25y.


The above swapper said that “gilts continue to be quite volatile and have for a long time been underperforming other markets. That turned around a bit yesterday and since weak (UK) housing market data today it has out-performed sharply, which may have triggered more XVA flows in the long-end.” Certainly, as the EUR/USD curve flattened slightly today, led by the front-end, it was conspicuous that the cable curve steepened (3m30y +0.875bps at -21bps) led by the long end.


The 30y gilt yield is currently 5bps lower on the day versus 0bps for the Buxl and 2bps lower for 30y USTs.


Elsewhere in terms of flow, the 10y EUR/USD sector saw a lot of activity between -30.5 and -30.25bps amid a smattering of 10y EUR issues there today. It is currently unchanged at -30.125bps.



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


New issues


USD new issues:

  • NRW Bank is working on a $500m 2y via CIBC (B&D), Daiwa, GS and Scotia.  A1/AA/AAA.  To price at swaps +25bps.


  • CIBC plans a USD 5y Covered Bond at around swaps +95bps via BofA, CIBC, Deutsche, HSBC and TorDom.


  • Hong Kong last night priced $2.25bn of bonds in three tranches consisting of $500m of 3y at USTs +30bps, $750m of 5y at USTs 35bps and $1bn of 10y at +40bps via a battalion of banks consisting of BNPP, BofA, Citi, CA, Hong Kong & Shanghai Bank, JPM, Mizuho, MS and UBS. This is one part of Asia’s largest ever Green Bond issue which last night saw Hong Kong sell $6bn equivalent of EUR, USD and CNH bonds.


EUR new issues:

  • Switzerland’s Zuercher Kantonalbank is close to pricing a €500m, 6y NC5 bond at swaps +115bps via BNPP, Deutsche, UBS (B&D) and ZKB.


  • Norwegian utility Statnett has priced a €500m 10y Green bond at swaps +60bps. Leads are Barclays, BNPP, NatWest (B&D) and SEB.


  • The UK’s 3i Group plans a €500m 6y through Barclays, DB and ING.


  • Hong Kong yesterday priced a €750m 4y Green Bond at swaps +30bps and €750m of 9y bonds 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.


  • Nationwide Building Society yesterday priced a €500m, EURIBOR +50bps, 2y FRN at par via Deutsche and Lloyds.


GBP new issues:

  • KfW yesterday priced a £300m tap of its 1.125% 2025 note at gilts +58bps to yield 4.975%. Leads are Barclays and HSBC (B&D).


CHF new issues:

  • Toyota Motor Finance is close to pricing a CHF 200m, 4y bond at around SARON +42bps via BNPP and Commerzbank.


  • Sweden’s Akademiska AB has priced a CHF 150m, 12y bond at swaps flat via UBS.


  • Nordic Investment Bank has priced a CHF 150m, 1.5%, 5y bond via BNPP at SARON -24bps.


NOK/SEK/DKK new issues:

  • EIB has priced a NOK1bn tap of its 3.75% 2028 CAB via DNB at 3mN +14bps. 


  • Kuntarahoitus yesterday priced a NOK 1.5bn tap of its 3.54% April 2027 bond via Danske.


AUD new issues:

  • Corporacion Andina de Fomento (CAF) raised AUD70m via selling new 4.5%, June 7, 2033 Kangaroo bonds at 103bps over ASWs.


JPY new issues:

  • RBC today priced a JPY 20bn, 2030, 1.02% bond at par via Daiwa.


  • Credit Agricole has finalised the pricing of its upcoming Samurai bond offer (over TONA swaps) as follows: 3-year at +50bps, 5-year at +61bps, 10-year at +65bps, 4NC3 at +92bps, 6NC5 at +105bps and 10NC5 at +180bps. Final pricing is expected tomorrow. Leads are Daiwa, MUMSS, Mizuho, Nomura, SMBC Nikko and CA itself.