EUR Swaps: Flattening back; Clients eye EUREX/LCH basis

Line chart 25 Mar 2021
Supply continues to arrive, while the swap curve has flattened back. Clients eye opportunities in EUREX/LCH basis.

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  • Flattening back; Clients eye EUREX/LCH basis
  • Re-enter strategic ASW shorts - Commerzbank
  • New issues

    Flattening back; Clients eye EUREX/LCH basis
    Supply remains in focus and includes a CofE €1bn 5y deal while sovereign issuance has brought a €4bn 10y German tap.

    The euro swap curve has flattened back after yesterday’s steepening with 2s/10s last at -51bps (-2bps) and 10s/30s at -33.5bps (-1.5bp).

    In latest ECB speak, Knot said the market may be underestimating the chances of a September hike. Euribors lost up to 5bps and the Bund future dropped around 50 ticks, although both have since rallied back to -3bps and down 20 ticks.

    Bund asset swap spreads continue to tighten and some banks expect the tightening to continue over the medium term (see below). Last Bund ASW prices vs 6mE were Bobl at 64.5bps (-0.6bp), Bund at 60.5bps (-0.7bp) and Buxl at 24.5bps (-1.7bp).

    Elsewhere, the seasonal return of new issuance and its associated hedging through interest rate swaps presents an opportunity for end-users to access increased market liquidity. But when it comes to gaining access to the EUREX/LCH basis market, clients say you have to act quickly. For more, see Clients eye EUREX/LCH amid seasonal flows


    Re-enter strategic ASW shorts - Commerzbank 

    In a strategy note published today, Commerzbank recommends re-entering strategic ASW shorts. The bank writes: 


    • "Swap spreads continue to grind tighter and Schatz-spreads vs. €STR have even taken out the key 40bp mark. Although the bulk of the latest leg tighter mostly reflects the usual collapse of the futures roll, risks of self-reinforcing cash/ASW-richening have fallen significantly when adding persistently cheap levels of GC, specials and BuBills to the equation.


    • "Hence, markets are turning the page on the Bundesbank faster than we had anticipated but add weight to our core conviction that the Bundesbank's remuneration will become 'just' another reference rate rather than the pricing benchmark for German paper and that the supply of and demand for collateral constitute the key pricing factors.


    • "As these continue to argue for tighter spreads amid still elevated forward specialness and hence attractive risk-adjusted carry, we have resumed our strategic ASW shorts."



    New issues

  • Sartorius Finance BV plans EUR four-part deal after investor calls beginning on 7 September. Leads are BNPP, DB and JP Morgan.

  • Assa Abloy AB, a Swedish manufacturer, is working on a EUR three-part deal. It is pricing EUR 3y around swaps +60bps, 7y around swaps +100bps and 12y around swaps +125bps. Leads are Barclays, BNPP (B&D), BofA, Citi, Mizuho and SEB.

  • Bankinter SA is pricing €500m (max) 8y NC7 Senior Non-Preferred around swaps +200bps through CA (B&D), Bankinter, DB, Natixis and Santander.

  • International Distribution Systems (IDS), a UK company, plans EUR 5y after investor calls. Leads are Commerzbank, SEB and UniCredit.

  • Ferrovial SE is pricing €500m (max) 7y Sustainability-Linked bonds around swaps +140bps through HSBC, Sabadell, BBVA, BofA, Citi, JPM, MUFG, RBC and Santander.

  • Rexel is pricing €400m 7y NC3 Sustainability-Linked bonds around 5.375% through CA (B&D), HSBC, SocGen, BofA, Barclays and WFS.

  • ZF Finance Europe BV is pricing €500m 5.5y Green around 6.5% through BNPP, Mizuho (B&D), SMBC and UniCredit.

  • CofE Development Bank is pricing €1bn 5y at swaps -7bps. Latest orderbook size reported to be above €525m. Leads are BofA, DZ, JPM and Natixis.

  • Investitionsbank Berlin is pricing €500m (max) 5y Social bonds at swaps -1bps through CA, DB, DZ, Helaba and LBBW>

  • Raiffeisen plans to sell EUR 5y NC4 Senior Non-Preferred after investor calls. Leads are BNPP, BofA, DB, Raiffeisen, SocGen and UBS.

  • IMCD NV plans €500m (max) 5y after investor calls on 6 September. Leads are BNPP, DB, HSBC and Rabobank.

  • Praemia Healthcare, a French company, plans EUR 5y Sustainable bonds through BNPP and SocGen.

  • Development Bank of Japan (DBJ) is pricing €500m 4y Sustainable at swaps +22bps through Daiwa (B&D), BofA, BNPP and Mizuho.

  • Santander Consumer Bank is pricing EUR 4y Senior Preferred around swaps +140bps through Santander (B&D), BofA, CA, HSBC, ING and UniCredit.

  • Mediobanca is pricing €500m (max) 4y NC3 Sustainable Senior Non-Preferred around swaps +170bps through Citi, Mediobanca, Santander, SocGen and UniCredit (B&D).

  • MBank plans EUR 4y NC3 Green Senior Non-Preferred around 8.75% through BNPP, Commerzbank (B&D), DB, Erste and UBS.