GBP Swaps: Bear-flattening; Issuance; Syndi talk

Chart numbers candles 14 Jun 2022
Gilts bear-flattened but also underperformed a touch ahead of key UK data this week. IG issuers filled a gap. Banks look ahead to the syndi.

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  • Bear-flattening

  • 2063 seen cheap ahead of expected syndication: RBC

  • New issues: NRW.Bank, Nationwide, Kommunekredit



The front end led today’s low-velocity selloff with the gilt heading for the close just off the session's nadir at 93.13, 50 ticks weaker on the day. Despite a lack of domestic data (average earnings are due Tuesday and consensus is for a BOE-unfriendly pop to 7.4% from 6.9%), 10y gilts still underperformed by around 3bps versus USTs and Bunds. Shorter in, SONIAs fell by up to 11 ticks in Dec24 as both the labour market data and CPI/RPI lie ahead. 2s/10s gilts drifted down to -49.7bps (-0.8) and 10s/30s flattened to 18.8bps (-1.4). DMO supply this week is £2.5bn of the 1.5% 2039.


In IG issuance, another trio of names filled the gap left by the lack of euro deals with NRW.Bank and Kommunekredit tapping the 3y sector while Nationwide preferred 5y. Asset swaps were resilient with 3y ending richer at 56.4bps (+1.8) while 5y rose to 32.9bps (+1.0) from below 31bps at session lows. Still, 3y cable fell to test -16.875bps at the lows.      


Finally, inflation swaps rose to test fresh August highs at the front end with RPI 1y +5bps at 3.85% while 2y tested 4% before settling at 3.99% (+2bps), with the July RPI fix indicated at 8.81% before this week’s data, slightly below the 9.0% Bloomberg consensus and down from last month's 10.7% print.


2063 seen cheap ahead of expected syndication: RBC

Banks are beginning to look ahead to the upcoming long conventional syndication.


NatWest expects a £5bn tap of the 4% 2063 and finds the bond cheap on the curve. RBC agrees that the 4% 2063 is the most likely candidate and sees fair value of the bond at 2.5% 2065 +4.5bps, implying the 2063 “currently trades with a new issue discount of 3.5bps.” It continues: “The 4% 2063s are currently trading 0.6bp cheaper on RV vs the launch pricing of 2H65 + 6.5bp after accounting for moves in the broader ultra curve – which should be positive for demand.”


New issues: NRW.Bank, Nationwide, Kommunekredit

  • NRW.Bank sold a £300m short 3y 5.375% due Jul 2026 at gilts +64bps. Leads are Barclays, BofA, HSBC and Nomura (B&D).


  • Nationwide sold a £700m 5y 6.125% Aug 2028 at gilts +150bps. Leads are GS, JPM, NatWest (B&D) and Nomura.


  • Kommunekredit sold a £100m 3y 4.25% Nov 2025 at gilts +34bps. Leads are HSBC and RBC.