EUR Swaps: Tracking USTs; Issuance eyed

Chart lines Oct 2022
Bunds have tracked USTs lower in a reversal of yesterday's move. In issuance, there are signs of a small revival after EFSF sent a RfP.

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  • Tracking USTs; Issuance eyed
  • TLTRO repayments by country - DB
  • New issues

    Tracking USTs; Issuance eyed
    Bunds opened lower following overnight hawkish FOMC minutes with the 10y future losing up to 76 ticks in early trading while the 10y yield got marked around 2.70%. However, the market has since come back a touch with the future last down 40 ticks and the 10y yield marked at 2.685% (+3.5bps).

    “Activity remains at summer levels and we are very much tracking data in the US market, although the latest numbers weren’t much of a mover,” said one euro swapper. Among the numbers released at 14:30 CET, US Initial Claims printed near consensus at 239k vs 240k.

    Meanwhile, there are signs of the new issuance market seeing a small revival with EFSF sending a RfP to banks for a deal likely to price in the near future. In a strategy note published today, Commerzbank suggests the RfP could be “possibly for a syndication at the long-end of the curve next week.”

    In the meantime, a couple of smaller deals are pricing today including SR-Bank €500m (max) 5y Green SNP and DZ Hyp €500m 4.5y Green Covered.

    Bund swap spreads are relatively stable after the volatility seen a couple of week’s back. Today invoice prices vs €STR were last Schatz at 46.9bps (+0.1bp), Bobl at 44.8bps (+1.3bp), Bund at 42.5bps (+1.8bp) and Buxl at 21.4bps (+1.1bp).

    Across the euro swap curve, 2s/10s has seen a reasonable steepening with the curve last +3bps at -51bps while further out 10s/30s was 0.5bp steeper at -38.75bps. “Interest has been a bit more balanced the last couple of sessions with receiving meeting some paying,” a euro trader said earlier.


    TLTRO repayments by country - DB
    Strategists at Deutsche Bank review TLTRO repayments by country following the release of recent data. The bank writes:

    • ”The country level breakdown of the last TLTRO repayment in June (€502bn in total, including early repayment)… Italy had been lagging in terms of early repayments, so it is unsurprising that it was the largest (€145bn) - making up around a third of the aggregate amount - followed by France (€117bn).

    • “There is currently €592bn outstanding, with two further maturities this year (€67bn in September and €41bn in December). The pace of early repayments had been slowing (€29.5bn in June, €87.7bn in March) and we expect that will remain the case going forward, most likely used to smooth out upcoming repayments. As it stands, around three-quarters of the remaining outstanding is roughly equally split between Italy, France and Germany, though Italy remains the least able to rely on excess liquidity for repayments.

    • “the jump in MRO usage at the time drew some attention - the data suggests it was primarily due to Italy but also Germany to a lesser extent. Take-up has since declined to around €6bn from the €18bn seen last week.

    • “In terms of the distribution of excess liquidity which remains heavily skewed, the proportion held in Germany (32%) has risen marginally over the past year - potentially helped by decline in non-monetary deposits given it was the largest proportion - while it has declined the most in Italy.”


    New issues

  • EFSF yesterday sent a RfP to banks ahead of the planned sale of EUR issuance.

  • SR-Bank is pricing €500m (max) 5y Green SNP around swaps +150bps through Citi, HSBC, ING, Nordea and SocGen.

  • DZ Hyp is pricing €500m 4.5y Green Covered around swaps +4bps through Barclays, DB, DZ (B&D), Helaba, SocGen and TD.