Basis: New dawn fades, but will be back; Barclays eyes JPY/USD

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By mid-week the new dawn of Autumn trading conditions seemed to have returned to the new issuance market, only to fade. Barclays eyes JPY/USD.

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  • New dawn fades, but will be back


  • Barclays: Seasonality to tighten, steepen JPY/USD basis


  • New issues:



New dawn fades, but will be back

By mid-week the new dawn of Autumn trading conditions seemed to have returned to the new issuance market, with issuance coming alive in all core markets but particularly in USD, as exemplified by the EIB’s $4bn 5y on Tuesday and the Asian Development Bank’s £4bn Wednesday whopper


This new dawn has faded now to virtually nothing as Friday issuance conditions have been exaggerated by the fact that it is still August, for heaven’s sake!


And with basis markets still understandably thin and prone to being pushed around by anticipated flows, some of the notable new issues that might be basis candidates were not necessarily basis-swapped.


Norway’s Kommunalbanken, for example, priced a decent $1.25bn 5y bond on Wednesday as the belly got busy. That was swapped to floating-rate USD, but no further.   


Mostly this week, despite the prominence of USD supply over EUR, sources said that flows were typically two-way and understandably on the lightish side, although combined USD, EUR and GBP issuance in excess of EUR 30bn bodes well for the coming Autumn downpour.


Flows today are light while yesterday they were widespread, with the most prominent being in10y EUR/USD, which traded a number of times and in decent size at -30.125bps, as did 15y cable at -27.125bps.


Over the course of the week, the two way nature of flow is well illustrated by the busy 5y EUR/USD tenor, which has traded between -28.75bps and -28bps since Monday.  



Barclays: Seasonality to tighten, steepen JPY/USD basis swaps

Looking ahead to the looming Autumn and its promise of a usually frenetic return to full activity by fixed income markets, strategists at Barclays today focused on what that means for the JPY/USD cross-currency basis market.


It notes that Japanese issuance of foreign-currency bonds tends to put tightening pressure on longer-tenor USDJPY xccy basis towards the issuance date, which is “exactly (the) opposite to the flow with samurai bonds (issuance of JPY bonds by foreign issuers).” It adds that “although there are no data on how much is swapped to the JPY, the response of medium-tenor USDJPY xccy basis around the issuance date indicates basis-tightening pressure on average, suggesting that some leads to actual basis paying.”


“This response of USDJPY xccy basis is evident, albeit to varying degrees, in the case of all issuers, including financial institutions, governments/agencies and others. More specifically, for financial institutions, when the size of issuance exceeds the average or when it is in the top 10%, the tightening response in USDJPY xccy basis tends to be correspondingly larger.”


Barclays concludes that “looking at seasonality in the issuance of foreign currency bonds, there is a tendency for issuance to be brisk in July and September and sluggish in August. Although the trend in USDJPY xccy basis depends on overall supply-demand factors including basis-receiving demand and carry trades, a revival in the issuance of foreign-currency bonds in September after a weak August could put tightening pressure on medium/long-tenor xccy basis and exacerbate recent steepening due to short-tenor widening (eg, the 1y/5y curve).”




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



New issues


USD new issues:


  • JFM late yesterday priced a $750m, 3y bond at SOFR swaps +62bps. Leads were Barclays (B&D), BNPP, Daiwa and GS.



  • Pacific Life Global Funding II on Wednesday priced a $600m 3y FA-backed note. Leads GS, JPM, MS and WFS.  Aa3/AA-/AA-. +88bps.



  • Kommunalbanken A/S on Wednesday priced a $1.25bn 5y at mid swaps +44bps. Leads are BMO, Nomura, Scotia and TD.



  • Asian Development Bank on Wednesday priced a $4bn 5y Global at swaps +35bps via Barclays, BofA, Citi and JPM. It followed that up today with a $75m tap of its Aug 2026 SOFR +100bps FRN via BMO, GSI and RBC.



  • Bank of Communications HK on Wednesday priced a $500m 3y Green FRN at SOFR +60bps. Leads Bank of Comms, CA and HSBC.



EUR new issues:

  • Swedish Export Credit on Wednesday priced a EUR 600m 7y Senior Preferred at swaps +22bps through BNPP, CA, DB and HSBC.


  • Nordea Mortgage Bank is pricing €1bn 3y Green Covered at swaps +5bps through Barclays (B&D), DZ, Natixis, Nordea and UniCredit.


GBP new issues:

  • Deutsche Bank today priced a sprightly £30m, 4.75% bond at 98.6. Self-led.


  • BBVA on Wednesday priced a £300m 10.25y NC5.25 Tier 2 sub 8.25% bond due Nov 2033 at gilts +360bps. Leads are BBVA. Lloyds (B&D),NatWest and Nomura.   


  • Deutsche PBB on Wednesday priced a £250m 3y Covered FRN at SONIA +68bps. Leads are Barclays, BMO, Nomura (B&D) and TD.


AUD new issues:

  • UK’s Lloyds Banking Group yesterday priced a AUD 750m, 7.806% 10NC5 Kangaroo bond at par via ANZ, Citigroup, Nomura, UBS and Westpac.


CNY new issues:

  • The African Development Bank today priced a CNY 1bn, Jan 2027, 2.46% bond at par via Natixis.