EUR Swaps: Bear steepening; EU announces new 7y

Equity Graph
The euro swap curve is bear steepening after hawkish overnight BOJ comments. The EU announces plans for a new 7y.

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  • Bear-steepening after hawkish BOJ 

  • Bearish Bunds; Long Schatz vs Bobl ASW - BofA

  • New issues


    Bear-steepening after hawkish BOJ  

    Overnight hawkish comments from the BOJ, see JPY Swaps: Hawkish Ueda triggers panic 10y bid and stronger yen, put pressure on Bunds today with the 10y future last down by 40 ticks and the 10y yield up 3bps at 2.64%.

    The euro swap curve is bear-steepening with 2s/10s last up by 1.5bp at -50.75bps and 10s/30s up +0.25bp at -33.75bps. Meanwhile, speaking at the end of last week sources say there had been renewed interest in steepener positions. 

    In supply, European Union has announced details for its first syndication of the post-summer period with the sale of long 7y bonds through BofA, CA, MS, Nomura and UniCredit.


    For some, the EU supply is being eyed as a key test for investor appetite for SSA bonds under the new post-QE, higher-for-longer rate regime. 

    The Bund asset swap spread curve has flattened with last prices vs 6m, Schatz at 65.5bps (+1.2bp), Bobl at 64.7bps (-0.1bp), Bund at 60.4bps (-0.9bp) and Buxl at 24.1bps (-1.1bp).



    Bearish Bunds; Long Schatz vs Bobl ASW - BofA 

    In its latest rates weekly BofA stays bearish Bunds and holds a long Schatz vs Bobl ASW widener. The bank writes: 


    • "We remain bearish Bunds near term due to the combination of: long positioning, elevated supply in Sep and hard data that can outperform low expectations on the back of the very weak PMIs... Long duration positions have been reduced marginally in core EUR, but: (1) views have moved by more, creating a gap between (long) exposures and views, (2) the long rates position is seen as the most crowded trade, and (3) investors are not trading the high supply theme, even if most expect EGB supply to be harder to absorb in H2. 



    • "We recommended a long Schatz vs Bobl Euribor spreads (ie. selling the ASW box), arguing that (1) Bobl spreads looked richer in our regressions, (2) Bobl spreads would be more under pressure from supply, and (3) when the ECB announces a change to the remuneration of government deposits, Schatz spreads would richen more. We still believe in these elements, but, since then, Schatz spreads came under significant tightening pressure, taking our position at around its stop. Also, the futures roll needs accounting for. We therefore revise our stop and target, to both incorporate the roll and to move the stop lower. We now target Schatz ASW spread at 15bp above Bobl spread, stop at -5bp (current -0.1bp). The risks include reduced issuance and a drop in rates vol."


    New issues

  • European Union plans to sell EUR Dec 2030 bonds through BofA, CA, MS, Nomura and UniCredit.

  • AFD plans €500m (max) 15y Sustainable through BNPP, Citi, JPM and Natixis.

  • Romania is pricing EUR 5y around swaps +255bps and 10y around +360bps through Citi, Erste, HSBC, JPM (B&D) and SocGen.

  • Pernod Ricard is pricing €600m 4y at swaps +45bps and €750m 10y at +75bps through Barclays, BNPP, CIC, ING (B&D), MS, Santander and SMBC.

  • Fluvius System Operator is pricing €500m (max) 7.5y at swaps +95bps through Beflius and BNPP (B&D).

  • Crelan, a Belgian retail bank, plans EUR long 6y NC5 Green SNP through CA, Commerzbank, JPM and Santander.

  • IMCD NV is pricing €500m (max) 5y at swaps +183bps through ING (B&D), BNPP, DB, HSBC and Rabobank.

  • Coty Inc, a US cosmetic company, plans to sell €500m senior secured notes in the near future.

  • Kexim, Korea Import Export Bank is pricing €500m (max) 4y at swaps +40bps through BofA (B&D), DB, Mizuho, Nomura, SocGen and Standard Chartered.

  • Deutsche Bahn Finance is pricing €600m 4y at swaps +20bps through Citi (B&D), DZ, IMI and SEB.

  • Millenium Bank SA is pricing EUR 4y NC3 SNP around 10% through BNPP, Erste, BCP, MS (B&D) and UBS.

  • Zuercher Kantonalbank is pricing €500m (max) 4y NC3 around swaps +115bps through BNPP, DB, UBS (B&D) and ZKB.

  • Banco BPM is pricing €500m (max) 3y Covered around swaps +50bps through Arkos, Commerzbank, IMI, Natixis, Nomura, NordLB and SocGen.

  • DekaBank plans €250m long 3y Covered through Deka, DZ and Erste.

  • Bendigo and Adelaide Bank plans €500m (max) 3y Covered through Barclays, Natixis and UBS.