USD Swaps: Lackluster 3y; IG nearly $11bn; Carry trades

Chart green 25 Mar 2021
The $44bn 3y auction tailed 1bp with an 20% dealer allocation. IG supply had a busy day with nearly $11bn priced. JPM looks at attractive carry trades

Start a free trial to read this article

Join today to access all  Total Derivatives content and breaking news. Already a subscriber? Please Log In to continue reading.

Or contact our Sales Team to discuss subscription options.

Get in Touch
Blurred image of Total Derivatives article content



  • Lackluster 3y; IG nearly $11bn; Carry trades

  • New issues


    Lackluster 3y; IG nearly $11bn; Carry trades  

    Treasuries drifted back a touch higher this afternoon, but the steepening that emerged at the start of the session remained largely intact. The 10y note yield is last 4.29% or 3bps higher in yield while 2s10s is last 2.8bps higher at -70bps while 5s30s is last 2.9bps steeper at -3.57bps. Equities ended higher (DJIA+0.19%, S&P +0.68% and Nasdaq +1.17%).


    Earlier, the $44bn 3y auction tailed 1bp versus the 1pm bid side, drawing a rate of 4.66%. Indirects fell (57.7%) considerably while directs rose to make up some of the deficit (22.1%) while primary dealers saw almost double the allocation vs. the two previous with a 20.3% takedown.


    Swap spreads saw a modest flattening versus the underlying steepening of the curve amid lower volumes throughout. IG new issuance (ex-SSA) saw a busy session of $10.5bn price across eleven issuers, bringing the MTD to $66.5bn.


    Elsewhere, looking at attractive sources of carry relative to risk, analysts at JP Morgan view forward curve steepeners paired with spot curve flatteners as one such position.  


    Specifically, JP Morgan recommends 3y forward 3s/30s swap yield curve steepeners paired with 63% of the risk in near-spot 5s/30s swap yield curve flatteners:


      “The 3y forward 3s/30s curve is well correlated to the 3m forward 5s/30s curve, but is now 4bp too flat relative to this relationship,” it highlights.


      In addition, JP Morgan calculates 3m carry on the package at a sizeable 5bp. “Given the ~20bp annualized volatility of the weighted yield spread, this translates into an annualized carry-to-risk ratio of ~1.0."


    2s -10.5bps (+0.125bps), 3s -18.25bps (-0.375bps), 5s -21.75bps (+0.125bps), 7s -30.5bps (+0.125bps), 10s -29.3755bps (-0.125bps), 20s -63.75bps (-0.25bps), 30s -67.25bps (-0.25bps).



    New issues

    For a complete review of issuance over the past week, please see USD New Issues.


    • FWD Group has mandated HSBC, JPM, MS, Mizuho and Standard Chartered to lead a 10y, USD 144A bond issue.


    • Energy Development Oman plans a 144A 10y Sukuk via JPM and Standard Chartered.


    • CADES plans a USD 3y Social bond at around swaps +37bps. Leads are BNPP, CA, DB and JPM.  Expected to price tomorrow.


    • IDB Invest is working on a $500m (no grow) 5y SOFR. Aa1/AA+/AAA. Price talk mid swaps +57bps area. Expected to price tomorrow.      


    • Nevada Power priced a $500m long 30y. Leads BofA, JPM, Mizuho, RBCCM and TSI. A2/A+. +163bps.


    • T-Mobile priced a $2bn 2-part ($1bn long 10y and $1bn long 30y). Leads Citi, MS, RBCCM and WFS. Baa2/BBB/BBB+. +148bps and +163bps.


    • Veralto Corporation priced a $2.1bn 3-part ($700m 3y, $700m 5y, $700m 10y). Leads MS, Citi, BofA, Barclays, BNPP. +80bps, +95bps and +120bps.


    • Maersk priced a $750m 10y Green. Leads Barclays, Citi, HSBC, JPM and MS. Baa2/BBB+. +165bps.


    • CNH Industrial priced a $500m 6y. Leads JPM, RBCCN, Santus, WFC. Baa2/BBB/BBB+.  +122bps.


    • Mohawk Industries priced a $600m 5y benchmark. Leads BAC, JPM and Mizuho. Baa1/BB+/BBB+.  +145bps.  


    • BBVA priced a $1bn perpetual NC6y bond at 9.375% via Barclays, BBVA, BofA, HSBC, MS and SocGen. Ba2/BB.


    • Patterson-UTI priced a $400m 10y. Leads GS, USB and WFC. Baa3/BBB-/BBB-. +290bps.


    • ABN Amro priced a $1.75bn 2-part SNP ($1.25bn 4y NC3 fixed and $500m 4y NC3 FRN). Leads ABNUS, Citi, GS, MS, TD, WFS. Baa1/BBB/A. +165bps and SOFR +178bps.


    • Marvell Technology priced a $1bn 2-part ($500m long 5y and $500m 10y). Leads BofA, JPM and WFS. Baa3/BBB-/BBB-.+140bps and +175bps.      


    • Southern Co. priced a $500m 10y. Leads BofA, Citi, MUFG and Scotia. Baa1/BBB+/BBB+.  +148bps.


    • Santos priced a $850m 10y 144A bond at +265bps via Citi, Deutsche, Mizuho and RBC. Baa3/BBB-/BBB.


    • KEXIM priced a $2bn 3-part ($500m 2y, $1bn 5y and a $500m 10y). Leads BofA, Deutsche, Mizuho, Nomura, SocGen and Standard Chartered.  Aa2/AA/AA-. +45bps, +75bps and +95bps.  


    • Bank of China Dubai priced a $500m 3y Green. Lead Credit Agricole. A1/A/A. SOFR +60bps.