USD Swaps: Steeper after ADP and GDP; NFP to fix range

Chart line 30 Jan 2023
USTs are steeper on the back of gains at the front end following softer-than-expected ADP and GDP. Ahead, banks see NFP setting the range.

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  • Curve steepens as ADP and GDP miss forecasts

  • NFP to decide trading range: SocGen

  • New issues: KfW, Allianz


Curve steepens as ADP and GDP miss forecasts

USTs were higher at the front end and the curve remained steeper following slightly softer-than-expected ADP jobs (+177K versus +371K last month) and downwardly revised GDP growth numbers, with second quarter growth now put at 2.1%. The 5y is 4.24% (-3bps) and 5s/30s is around 3bps steeper against a backdrop of small losses for S&P futures and CPI-driven weakness in Bunds (see Total Derivatives EUR Swaps).    


Swap spreads are little-changed at -21.125bps (+0.125) in 5y, -27.00bps (unch) in 10y and -66.50bps (-0.125) in 30y, while swap volumes strongest in the 30y bucket.


NFP to decide trading range: SocGen

Ahead, after mixed signals from the JOLTS data yesterday and ADP jobs today, the upcoming employment report will be key to gauging the pace at which the labor market easing. SocGen explains:


    “The August jobs report due on Friday will inform if the selloff in bonds that began in early August has more room to run. Although 2y and 10y yields are near the highs for the year, we think it is too soon to conclude a durable shift to a higher trading range. The decline in job openings and the drop in consumer confidence suggests a need to temper the recent optimism on the economy.


    “2y yields tend to be more sensitive to NFP data than 10y yields…. While the change in NFP over the past year has consistently surprised to the upside, that is unlikely to persist as we approach the end of the cycle. A jobs number that is at or below-consensus, especially after the large move higher in yields, is likely to lead to lower yields.


    “The market is now fully priced-in for a ‘higher for longer’ for longer scenario, and 1y1y OIS is back near the high end of the recent range. We believe risks are skewed toward lower yields.”


New issues: KfW, Allianz

  • KfW plans a USD short 3y Global at swaps +25bps. Leads are Barclays, MS, and RBC.


  • Allianz is preparing a USD 30y NC10 Tier 2 bond at around 6.75% through BofA, BNPP, Citi (B&D), CA and HSBC. 


  • LG Energy plans USD 3y and/or 5y Green bonds after meeting investors from Aug 30. Leads are BofA, Citi, MS, StanChart and KDB.


  • Japan’s Aozora Bank is preparing a USD 3y Green bond at around Treasuries +160bps. Leads are Citi, GS and MS (B&D).