EUR Swaps: Clients scale back shorts; ECB MMCG meets

Computer lines code 30 Jan 2023
UK inflation data hit euro fixed income but the market has since rallied back amid talk some clients are scaling back on short positioning.

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  • Clients scale back shorts
  • ECB MMCG reviews funding conditions 
  • New issues

    Clients scale back shorts
    Higher-than-consensus UK inflation hit gilts and dragged Bunds lower first thing today, before rallying back and leaving the 10y Bund future last down by 10 ticks while the gilt was down 95 ticks having lost almost 1.5 points after the data.

    “Bunds have been keen to rally the past couple of sessions… We saw some clients using this morning (sell-off) to cut back on some shorts, possibly ahead of the summer period,” said one euro trader earlier. 

    Across the swap curve, the long-end has flattened with 10s/30s last at -42.25bps (-1.75bp) and testing the lows from the past couple of months. “You sense there’s some interest to enter forward steepeners when we come back at these levels,” a trader said.

    In issuance, a handful of deals are set to price today including SEB €1bn 4y, CADES €3bn long 8y and Wallonne €700m long 15y.

    Bund asset swap spreads are mixed with the 5y and 10y sectors narrowing slightly. Last prices were Schatz at 72.7bps (+0.5bp), Bobl at 69.2bps (-0.4bp), Bund at 64.3bps (-0.3bp) and Buxl at 29.4bps (+0.1bp). Meanwhile, there are reports that some accounts may be scaling back on short ASW positions recently. 


    In basis, 3s6s was unchanged or a touch tighter after seeing a reasonable widening move yesterday. Last prices were 5y at 7.3bps (-0.1bp) and 10y at 2.95bps (unch).

    Ahead, among the possible near-term drivers for the euro market will be Fed Chair Powell’s testimony to US Congress.


    ECB MMCG reviews funding conditions
    The ECB’s Money market contact group (MMCG) is meeting today for the first time since March 2023.

    Among the topics up for discussion will be a review of money market activities including developments in euro repo markets and US dollar funding since the March banking stress. The group will also review bank funding strategies in view of TLTRO repayments and a reduction in the Eurosystem’s asset holdings. Finally, there will also be an update on interbank money markets and a discussion on how to revive activity in the unsecured market.

    For further details of today’s planned agenda, please see here 


    New issues

  • Wallonne is pricing €700m long 15y Green at OLOs +44bps through HSBC (B&D), ING, LBBW, Natixis and NatWest.

  • Saechsische Aufbaubank is pricing €250m 10y at swaps +8bps through Deka, HSBC, LBBW, NordLB and UniCredit (B&D).

  • CADES is pricing €3bn long 8y Social at OATs +26bps through Commerzbank, HSBC, Nomura and SocGen (B&D).

  • Nasdaq plans EUR long 8y and USD 4y to 40y bonds to fund its acquisition of Adenza. Leads are BofA, Citi, GS, JPM, MS, Nordea and SEB. 

  • SAGESS plans EUR 7y through BNPP, CIC, CA, HSBC and Natixis.

  • Aegon Bank NV is pricing €500m (max) 7y Covered at swaps +32bps through Barclays, DB, Rabobank, Santander and SocGen.

  • ADIF-AV is pricing €600m 5y at SPGBs +42bps through BBVA (B&D), Caixa, CA, HSBC and Santander.

  • Floene Energias may sell €420m (max) 5y this week through BBVA, BNPP, Mizuho and Santander.

  • SEB is pricing €1bn 4y Green at swaps +80bps through CA, GS, ING, MS and SEB.

  • Ceska Sporitelna is pricing EUR 4y NC3 SNP around swaps +275bps through Erste (B&D), ING, JPM, SocGen and UniCredit.

  • Nova KBM plans €300m 3y NC2 through BNPP, GS, OTP and UniCredit.