EUR Swaps: Gilt-driven; Issuance flow; Carry eyed

Up candle chart 25 Mar 2021
Another gilt-driven session has seen EGBs rebound and rally higher.

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  • Gilt-driven; Issuance flow; Carry eyed
  • Expect bull-steepening - BofA
  • New issues

    Gilt-driven; Issuance flow; Carry eyed
    “Like yesterday, this feels a bit gilt-led,” said one euro swapper earlier as the Bund rallied 85 ticks while the gilt future was up by 1.25 points. The short-end has also seen a rebound today with red Euribors last up by 2.5bps to 5bps while red SONIAs have gained 10.5bps to 14bps.

    Still, for some euro traders the focus remains on new issuance. “The ECB is out of the way and there’s not much in terms of macro data,” said one. Among the larger deals arriving today include Bpifrance €1bn 10y Green and Bank of New Zealand €750m long 5y Green.

    “There’s been a few bids in 3s6s forwards and that suggests there’s maybe going to be swapped deals,” said one trader. The 5y 3s6s basis was last marked +0.2bp at 7.45bps and 10y 3s6s +0.25bp at 3.1bps.

    Elsewhere, Bund asset swap spreads are wider by 0.5bp to 1bps. “That’s mostly due to the rally (in the Bund), but there are a few offers about as well,” a source said. Last prices were Schatz at 71.7bps (+1.2bp), Bobl at 69.0bps (+0.6bp), Bund at 64.0bps (+0.6bp) and Buxl at 29.6bps (+1.1bp).

    More generally, one trader felt there was a resurgence in carry trades for summer and the next couple of weeks, “There’s been some interest in forward steepeners that carry OK,” a trader said.


    Expect bull-steepening - BofA
    Strategists at BofA expect the euro curve to bull-steepen over the medium term from around Q423. It writes:

    • “We expect rates to rally after the terminal rate is reached. The pricing of cuts and slow grind lower in the market’s view of neutral can put bull flattening pressures on the curve. It is only as we approach the devilry of the rate cut, the dynamics of the curve is expected to evolve to bull steepening, from 2s10s and then in 2s5s.

    • "Our economists expect the first cut to be delivered only in Jun-24 and this, in part, explains why our forecast imply less steepening than what the market is pricing in 1y ahead.

    • “We also expect 5y5y Euribor to rally but by a lesser extent, reflecting the inflation in that period still expected to be above target and growing term premia in the curve against the backdrop of ongoing QT. The availability of bond supply, supported by QT, also leaves us with a bias for further asset swap tightening.”


    New issues

  • Bpifrance is pricing €1bn 10y Green SNP at OATs +29bps through BNPP, CA, GS, JPM and SocGen.


  • CADES plans a EUR long 8y Social bond due Nov 2031 through Commerzbank, HSBC, Nomura and SocGen.

  • Bspk Schwaebisch Hall is pricing €500m 10y Covered at swaps +21bps through Commerzbank, DZ (B&D), ING, LBBW and UniCredit.

  • Baden Wuerttemberg is pricing €600m 10y Green around swaps -1bps through Danske, Deka, DB, ING and LBBW.

  • Bank of New Zealand is pricing €750m 5.5y Covered at swaps +53bps through Barclays, BNPP, DB, NAB and UBS.

  • Madrid is pricing €600m (max) long 5y Green around SPGBs +23bps through BBVA (B&D), Caixa, CA, HSBC, ING and Santander.

  • Banco BPM is pricing EUR 5y Covered around swaps +60bps through Akros, Barclays, CA, IMI, LBBW, RBI and UniCredit (B&D).

  • Hamburg Commercial Bank is pricing €500m (max) long 4y Covered around swaps +20bps through Citi, Commerzbank, DB, Erste and Helaba.

  • Unibail plans EUR perp NC5.25 Hybrid around 7.25% through BNPP. The new bond can be exchanged against an existing hybrid after Unibail decided not to call the bond. 

  • Nova Ljubljanska is pricing EUR 4y NC3 Green Senior Preferred around 7.875% through Barclays, BofA, BNPP (B&D), Erste and Nova.