USD Swaps: Steeper; Cash to rule again?

Dollar USD bills 14 Jun 2022
The UST curve is a touch steeper and spreads are marginally wider after the data. Banks prefer cash to duration for the next quarter - again.

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  • Marginally steeper and wider

  • King cash continues to rule: Barclays  

  • New issues: Slovenia, Gilead, SEK, ESM


Marginally steeper and wider

Treasury yields are back to trading -2bps to +1bp led by the front end after stronger-than-expected data for unit labour costs (+2.2% versus the +1.9% consensus) and initial claims (216K versus 233K) briefly pushed yields higher. The 10y is 4.27% (-1bp) after testing 4.30% immediately after the numbers while SOFR futures are 0-2 ticks firmer in the reds ahead of a raft of Fedspeak including Harker, Goolsbee, Williams, Bostic and Bowman. In swaps, volumes are a touch below average and spreads are mostly better bid at -10.5bps (+0.50) in 2y, -22.25bps (+0.25) in 5y, 29.25bps (+0.125) in 10y and -67.125bps (+0.125) in 30y.


King cash continues to rule: Barclays  

Cash is “still king” according to Barclays’ latest cross-asset investment outlook, which concludes that cash is likely to outperform equities and fixed income again in Q4, after beating both in Q3. On duration, the bank judges that bonds are “not yet a compelling buy”:


    “We argue that while bonds definitely look better priced now than two months ago, they are not compellingly cheap. A growth slowdown – our base case – is not enough, in our view, to spark a meaningful rally. The consensus already forecasts US growth to slow to 0.4% in Q4, and the consensus forecast of 50k/month in average payroll growth next quarter is considerably weaker than our own 125k/month. Similarly, US headline inflation is already priced to fall to 2.5% y/y by mid-next year. We think these are fairly aggressive assumptions on the part of the market, and while the US economy could deteriorate further, the risk-reward to be long duration is not yet compelling.”


New issues: Slovenia, Gilead, SEK, ESM

  • Slovenia is preparing a USD 10y through Barclays, BNPP, Citi, DB, GS and JPM after meeting investors from Sep 7.


  • Gilead plans USD 10y and 30y bonds at around Treasuries +125 and 145bps. Leads are Barclays and Citi.


  • S&P Global is preparing a USD 10y in the region of Treasuries +130bps. Leads are Citi and BofA (B&D). S&P is rated A3 by Moody’s and A- by Fitch.  


  • Australian gas supplier Santos Finance (Baa3/BBB-) plans a USD 10y after meeting investors from Sep 7.


  • Swedish Export Credit (SEK) is working on a $1.25bn 3y Global via GS, JPM, MS and RBC.  Aa1/AA+.  Swaps +41bps.


  • ESMhas launched a $3bn 3y through BofA, CA (B&D) and TD at swaps +28bps.


  • Veralto Corp. (A3/A-) is preparing USD 3y, 5y and 10y bonds and EUR 6-8y. Leads are BNPP, BofA, Citi and MS (USD), and DB and GS (EUR).


  • Kexim plans USD 2y, 5y and 10y bonds, and/or EUR 4y after meeting investors from Sep 8. Leads are BofA, DB, Mizuho, Nomura, SocGen and StanChart.


  • LG Energy (Baa1/BBB+) is preparing USD 3y and/or 5y Green bonds after meeting investors from Sep 11. Leads are BofA, Citi, MS, StanChart and KDB.  


  • CaixaBank yesterday priced a $2bn 2-part ($1bn 4NC3 fixed and $1bn 11NC10) via Barclays, BNPP, BofA, Caixa, JPM and MS. +195bps and +255bps.


  • Barclays yesterday priced a $4.5bn self-led 4-part ($1.45bn 4NC3 fixed, $300m 4yNC3 FRN, $1.25bn 6NC5 and $1.5n 11NC10).  Baa1/BBB+/A. +175bps, SOFR +188bps, +205bps and +240bps.


  • Nippon Life yesterday priced a $930m 30y NC10 step-up sub (A3/A-) at 6.25%. Wia BofA, Citi, GS, JPM and MS.