EUR Swaps: More issuance arrives; Cheap €STR forwards

Chart line 30 Jan 2023
More issuance is arriving on the screens. Strategists find €STR forwards are cheap.

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  • More issuance arrives 
  • Cheap €STR forwards - Barclays
  • New issues


    More issuance arrives
    The Bund future has dropped around 50 ticks and is edging closer to the lows of last week. On market participant felt the market could be preparing itself for sovereign supply, “There are some syndications expected, plus the consensus seems to be long after summer,” he said.

    Among the candidates for sovereign syndications are Italy with banks slating a possible 10y BTP alongside a BTP Italia or Futura, Portugal having reported in its Q3 funding outlook that it is considering a syndication during H2, and Austria. 

    Meanwhile, new issuance continues to hit the screens despite the US Labor Day holiday with several new deals are expected to price today including BPCE, BPER, Orange, Santander Totta and Unicaja.

    Also, a couple of SSAs have announced plans for new euro deals. EIB is working on the sale of €3bn (max) EUR 5y EARN through Citi, MS, NatWest and TD. Also, World Bank (IBRD) plans EUR 15y Sustainable Development bond in the near future through Commerzbank, CA, DB and Natixis, and the EU sent an RfP to its banks last week. 

    Bund asset swap spreads are tighter across the board with last prices vs 6mE Bobl at 65.9bps (-1.4bp), Bund at 61.8bps (-1.0bp) and Buxl at 27.4bps (-0.9bp).

    Elsewhere, the EuroStoxx has gained 0.4% while the EUR 5y5y inflation swap has risen almost 2bps to 2.565%.


    Cheap €STR forwards - Barclays 

    In its latest rates weekly Barclays finds the €STR strip is pricing a high probability of a soft landing scenario unfolding. The bank argues €STR forwards appear cheap. It writes:  


    • "Based on our simulated path for hard and soft landings, the current market pricing for ESTR, which shows a c.50bp decline from the peak by Dec-24 (one year out), reflects roughly a 75% likelihood of a soft landing. In the macro factors-driven exercise carried out by our economists, the ECB deposit rate is predicted to fall by less than 25bp even in the most dovish specifications... 

    • "To sum up, ESTR forwards (2y1y, 3y1y) at current levels seem to be reflecting a higher for longer or a no landing scenario as their modal outcome (ie, restrictive policy for a very long time). The recent weakness in euro area growth momentum is a pushback against the argument that the ECB’s policy is not already restrictive and a lot more needs to be done (see Bunds and the stairway to 3% yields). In this light, these points on the ESTR curve look attractive to receive on an outright basis or versus belly forwards as the curve is still inverted."


    New issues: IBRD, EIB

  • World Bank (IBRD) plans EUR 15y Sustainable Development bond in the near future through Commerzbank, CA, DB and Natixis.


  • EIB plans €3bn (max) EUR 5y EARN through Citi, MS, NatWest and TD.

  • Assa Abloy AB, a Swedish manufacturer, plans a EUR three-part tranche after investor calls on 4 September. It is expected to issue EUR 3y, 7y and 12y bonds. Leads are Barclays, BNPP, BofA, Citi, Mizuho and SEB.

  • Orange is pricing €500m (max) 12y Sustainability-Linked bonds at swaps +72bps through CA, ING, SMBC (B&D), Barclays, DB, GS, La Banque Postale and Standard Chartered.

  • Ferrovial SE plans to sell €500m (max) 7y Sustainability-Linked bonds in the near future. Leads are Banca Sabadell, BBVA, BofA, Citi, HSBC, JPM, MUFG, RBC and Santander.

  • Tikehau Capital , a French asset manager, plans to sell €300-500m 2030 Sustainable bonds after investor calls on 4 September. Leads are CA, GS and SocGen.

  • BPER Banca is pricing €500m 6y NC5 Senior Non-Preferred at swaps +260bps through DB, UBS (B&D), BNPP, IMI, JP Morgan and Mediobanca.

  • BPCE SFH is pricing €1bn 5.5y Covered bonds at swaps +29bps through BMO, DB, Mediobanca, Natixis (B&D), RBI, Santander and SEB.

  • Landesbank Berlin plans €250m 5.5y Covered bond through Deka, DZ and Helaba.


  • Worldline SA, a French software company, plans to sell EUR 5y after investor calls on 4 September. Leads are CA, JP Morgan and UniCredit.

  • S-Bank Oyj plans to sell €500m (max) 5y Covered bonds after investor calls on 4 September. Leads are Danske, LBBW and Nordea.

  • Unicaja Banco SA is pricing €300m (max) 5y N4 Green Senior Non-Preferred bonds at swaps +325bps through BBVA, BNPP, Citi and Nomura.

  • Development Bank of Japan (DBJ) plans EUR 4y Sustainability bonds in the near future through Daiwa, BofA, BNPP and Mizuho.

  • mBank SA plans to sell EUR 4y NC3 Green Senior Non-Preferred bonds after investor calls on 4 September. Leads are BNPP, Commerzbank, DB, Erste and UBS.

  • Banco Santander Totta SA is pricing EUR 3y Covered around swaps +40bps through Barclays, CA, HSBC, Santander (B&D), SocGen and UniCredit.