EUR Swaps: EU €5bn long 7y arrives; Decline in Dutch PF Indexation eyed

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The EU is pricing €5bn long 7y with orders above €35bn. Banks forecast a decline in Dutch pension fund indexation.

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  • EU €5bn long 7y arrives with €35bn orders

  • Large indexation decline in Dutch PFs likely - BNPP

  • New issues


     EU €5bn long 7y arrives with €35bn orders

    The European Union's first syndication after the summer break is being priced today with the sale of €5bn long 7y at swaps +2bps through BofA (B&D), CA, MS, Nomura and UniCredit. 


    The latest orderbook size for the €5bn deal is reported to be above €35bn at a final spread of swaps +2bps. One market participant felt the order size was "OK, but nothing amazing".


    Speaking earlier, he said, "It's currently trading at the re-offer price +3cents in the grey market. Given the orderbook it's a bit surprising it's trading so close to re-offer and in reasonable size." 


    Elsewhere, in the latest data ahead of the ECB, German ZEW printed higher than consensus at -11.4 vs -15.0, up from -12.3 the previous month.


    The Bund future has since retreated from earlier highs and was last trading up 10 ticks while the 10y yield is marked around 2.63% (-1bp). 


    In swaps, the steepening seen yesterday has paused with 2s/10s last at -53bps (-1.25bp) and 10s/30s at -34.5bps (-0.75bp). 


    Bund asset swap spreads are mixed with the spread curve flattening. Last prices vs 6mE were Schatz at 65.9bps (+1.2bp), Bobl at 65.1bp (+0.2bp), Bund at 60.9bps (-0.3bp) and Buxl at 24.2bps (-0.5bp). 



    Large indexation decline in Dutch PFs likely - BNPP 

    Strategists at BNP Paribas forecast a heavy decline in the hedging needs of Dutch pension funds later this year. The bank summarizes: 


    • "We expect this year’s indexation announcements from Dutch pension funds – usually in November – to lead to a net hedging need of around EUR15mn DV01 compared to the roughly EUR50mn DV01 from last year’s indexation.


    • "The key drivers of the expected decline are lower inflation, lower funding ratios and pension funds’ preference for higher buffers ahead of the transition to a collective-defined contribution scheme. Recently published indexation methodology by Dutch fund PFZW supports this view.


    • "If all top five funds used this methodology, their average indexation level would be 3.09% versus 9.5% in 2022 (assuming 4% inflation)."


    New issues

  • AFD is pricing €500m (max) 15y Sustainable at OATs +39bps through BNPP, Citi, JPM and Natixis.

  • Veralto Corp, a US manufacturer, is pricing €500m (max) 8y around swaps +135bps through DB and GS (B&D).

  • European Union is pricing €5bn long 7y at swaps +2bps through BofA (B&D), CA, MS, Nomura and UniCredit. Latest orderbook size above €35bn.

  • Crelan SA is pricing EUR long 6y NC5 Green SNP around swaps +300bps through CA, Commerzbank, JPM and Santander.

  • Praemia Healthcare, a French healthcare real estate company, is pricing €500m (max) 5y Sustainable around swaps +250bps through BNPP, SocGen, BoA, CIC, CA and La Banque Postale.

  • DekaBank is pricing €250m long 3y Covered at swaps +9bps through Deka (B&D), DZ and Erste.

  • Rosenbauer International AG plans EUR sub-benchmark hybrid bonds through Warburg and Raiffeisen.