EUR Swaps: Bund retreats; Issuance revival

Chart line down Oct 2022
The Bund has taken back some of Friday's risk-off gains. Meanwhile new issuance has seen a revival.

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  • Bund retreats; Issuance revival
  • Outperforming duration; Structural ASW tightening - Barclays
  • New issues

    Bund retreats; Issuance revival
    The Bund has given back most of Friday’s risk-off gains with the 10y future last down about 60 ticks while the EuroStoxx has gained +0.7%.

    Elsewhere, swap spreads have also retreated across the curve with last prices vs 6mE, Schatz at 70.3bps (-0.3bp), Bobl at 69.9bps (-1.3bp), Bund at 65.1bps (-1.1bp) and Buxl at 29.3bps (-0.9bp).

    Meanwhile, issuance has seen a revival with a flurry of deals including CA €1bn 10yNC5, Commerzbank €1.25bn 5y Covered and CBA €1.5bn 4y Covered. KfW has announced plans to sell EUR long 5y in the near future while EFSF is pipelined with a deal this week and the EIB is active with a USD 5y deal.

    In basis, 3s6s was little changed despite the pick-up in new issues from banks which can sometimes spur bids in 3s6s as deals get swapped. Last prices saw 5y marked at 7.2bps (unch) and 10y at 2.95bps (-0.05bp).

    Ahead this week, ECB President Lagarde is due to speak at the US Jackson Hole conference on Friday.

    Outperforming duration; Structural ASW tightening - Barclays
    In its latest rates weekly Barclays summarises its view on euro duration and swap spreads. It writes:

    • “We see EUR duration outperforming in sell-off but underperforming in broader global rallies. Domestic dynamic remain constructive for EUR rates and most bearish pressures are coming from global factors. On the curve, we recommend spot EUR 2s/10s flattener.

    • “Over the longer term, we see potential for a structural tightening trend in EUR ASWs, underpinned by heavy net supply, accelerating QT, and some eventual tilt in the balance of flows in swaps away from paying and towards receiving as focus on growth risks builds. Elsewhere, we recommend longs in 10y Spain vs France, given fundamental supply/demand and political considerations.”


    New issues

  • EFSF last week sent a RfP for a deal expected to price this week. Some banks expect the supra to target the longer-end of the curve.

  • Credit Agrciole is pricing €1bn 10y NC5 Tier 2 at swaps +225bps through itself.

  • KfW plans EUR long 5y through DB, GS, HSBC and JPM.

  • Commerzbank is pricing €1.25bn 5y Covered at swaps +14bps through BMO, Commerzbank (B&D), Deka, Mediobanca, NatWest, RBI and SocGen.

  • Virgin Money UK plans €500m (max) 5y Covered through BBVA, BNPP, Lloyds, NordLB and Santander.

  • CBA, Commonwealth Bank of Australia, is pricing €1.5bn 4y Covered at swaps +35bps through BNPP, CBA, HSBC and SocGen.

  • Helaba plans EUR long 4y Covered through Commerzbank, DB, Helaba, Natixis, SocGen and UniCredit.

  • Slovenska Sporitelna is pricing €500m (max) long 4y Covered through BayernLB, DZ, Erste, ING and UniCredit.

  • Volvo Treasury is pricing €700m 3y at swaps +40bps through BNPP (B&D), BofA, DB and SEB.