Basis: Cable grabs baton; KEXIM views options

Fifty pound notes
Gilt losses are providing gains for arrangers of sterling new issuance, with another big short-dated FRN printing.

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  • Cable grabs baton

  • KEXIM eyeing alternatives to USD

  • Flows

  • New issues


Cable grabs baton

Gilts’ recent losses are providing gains for arrangers of GBP-denominated new issuance, with another arriving today in the form of a self-led £1bn, 1y, SONIA +48bps FRN from RBC following around £4.5bn of similar deals earlier this month, mostly from CAD names.  


One basis swapper said “I haven’t got loads to say about today… GBP issuance has had a busy couple of days (with Kommunalbanken also tapping GBP yesterday). RBC led its own deal so if it swapped it, it would have been done in-house. But it’s worth noting that CPPIB sold £1bn of (short 2y) bonds on Tuesday, and they always go back to CAD, so the GBP to CAD basis seems to be working in the front-end at the moment.”  


Also, trading data shows that there was a decent amount of 1y cable that went through yesterday afternoon at -12.5bps, shortly followed by a number of good-sized 1y CAD/USD basis flows at -18.5bps and -18.75bps, although this could be coincidence.


The recent pick-up in GBP issuance has not surprised the above basis swapper. “When you look at the gilt curve the 2y yield has risen 90bps so far in June (and there’s still selling one day to go) and 2s/10s has flattened about 70bps, so you can see why borrowers looking for short-dated supply will look at cable if the basis works.”


Elsewhere, there was little to excite the above basis swapper with Standard Chartered’s USD offering last night not seen as an obvious swap, while Cadent Finance’s €500m 6y offering yesterday was seen as a nailed-on swap back to GBP.


The cable basis curve steepened a bit today with 3m - 30y pushing 0.25bps higher to -0.5bps at -4.875bps, the belly of the curve was mostly unchanged, and 30y was +0.25bps at -13.75bps. Basis swappers noted decent 30y cable flow at -36bps yesterday, suggesting it was a reaction to a 30y gilt rally in previous sessions, but as 30y gilts sell-off today, ultralong cable flows are at a premium.


KEXIM eyeing alternatives to USD

In what sounds like good news for non-core basis swappers, Bloomberg reports today that the Export-Import Bank of Korea (KEXIM) is looking to diversify away from USD issuance in favour of other currencies, particularly the Swiss franc and Mexican peso.


KEXIM plans to sell $7.35bn equivalent of debt in H2 2023 and its CFO Kim Jin-seop said in an interview with the newswire that the state-backed lender is also looking at GBP and  CAD issuance, plus possibilities in the Formosa market, as it seeks to wean itself off USD dependency. Non-USD issuance from KEXIM is basis-swapped to USD.  



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



New issues


USD new issues:

  • Mizuho Financial Group is planning USD-denominated 6y NC5 Green and 11y NC10 bonds. Leads are JPM and Mizuho..


  • Standard Chartered last night priced a $2.5bn 3-part ($1bn 4y NC3, $500m 4y NC3 FRN and $1bn 11y NC10 bond). Leads are BNPP, GS, MS, StanChart (B&D) and TorDom. A3/BBB+/A. +185bps, SOFR +193bps and +258bps, respectively.


EUR new issues:

  • Chile has today priced a €750m, 11y Sustainability Bond at swaps +118bps via Credit Agricole, HSBC (B&D), Santander, Scotia and SocGen.


  • Realty Income Corp, a US REIT, yesterday priced a €550m 7y at swaps +195bps and €550m 11y at +225bps. Via Barclays, BofA, JPM and WFS.


  • Cadent Finance yesterday priced a €500m, 6y Green Bond at swaps +120bps via Barclays, BNPP, Credit Agricole, Mizuho and SMBC.


GBP new issues:

  • RBC has priced a self-led £1bn, July 2024, SONIA +48bps FRN at par.


  • Kommunalbanken last night priced a £150m tap of its 4% Feb 2026 note to give gilts +80bps and 5.872%. Leads are BMO, Citi (B&D) and RBC.


CHF new issues:

  • Helaba has priced a CHF 100m, 10y subordinated fixed-rate bond at SARON +50bps via UBS.


  • CIBC yesterday priced a CHF 300m 5y Covered Bond at SARON +18bps via Commerz and UBS.


CNY new issues:

  • RBC has priced a CNY 300m, July 2026, 3.4% bond at par via Citi.