USD Swaps: USTs bending flatter; 10y note auction preview

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USTs bending flatter; 10y note auction preview

Treasury yields have nudged off their earlier lows and are mostly narrowly mixed (~ +/- 1bps) as the curve flattens a bit.  The benchmark 10y note yield is 1bps lower at 4.278% after testing 4.26% earlier while the 2s10s spread is 1.9bps narrower at -72.4bps. 

In SOFR-space, red SOFR futures are 0.5 to 4 ticks softer while SOFR swap spreads are mixed with the spread curve flattening along with underlying rate amid below-average swap volumes across the board.  In the backdrop, the IG new issue calendar is building up some steam despite modestly sullied risk tone (Dow -0.02%, S&P -0.49%, Nasdaq -0.81%).

Ahead, Treasury will auction $35bn reopened 10-year notes, $3bn larger in size from the previous reopening auction in July, after yesterday’s $44bn 3y auction saw lackluster results.  However, heading into today’s supply, strategists at JP Morgan believe that the auction should be digested smoothly and they highlight the following:

”…The August 10-year auction cleared at 3.999%, 0.1bp cheap to pre-auction levels as end-user demand rose 2.9%-pts to 90.5%, the highest since February 2023. More granularly, the share allotted to foreign investors increased 7.3%-pts to 14.9% while investment manager demand declined 8.6%-pts to 68.5%.

 

“…Since the last auction, 10-year yields have risen by 28bp and are only 6bp off their cycle highs observed late last month. From a fundamental perspective, intermediates appear somewhat cheap relative to near term Fed policy, inflation, and growth expectations, though not as stretched as valuations appeared last fall. Along the curve the 10-year sector appears slightly cheap on the fly after adjusting for the level of rates and slope of the curve.

 

“…Meanwhile, risk appetite may be depressed at (today’s) auction, given our prior research has shown that 10-year auctions tend to price with larger tails when they fall the day prior to CPI releases than on all other days. However with four of the five hurdles laid out by Chair Powell supporting a Fed on hold, uncertainity around the upcoming inflation print may have less of an impact on tomorrow’s auction risk sentiment.

 

“…Overall, with yields sitting near their cycle higher and valuations flagging as cheap, we think (today’s) auction will likely be digested smoothly.”

SOFR swaps – 2s -10.75bps (+0.25bps), 3s -14.125bps (+0.375bps)*, 5s -21.875bps (-0.125bps), 7s -30.75bps (unch), 10s -29.5bps (-0.125bps), 20s -64.25bps (-0.125bps), 30s -67.5bps (-0.125bps).

* adjusted for the 4bps give.

New issues

• Bank of America is working on a self-led 4-part 4NC3 fixed/FRN, 6NC5 fixed-to-FRN and 11NC10 fixed-to-FRN benchmark.  A1/A-/AA-.  Price talk: +140bps area, SOFR equivalent, +160bps area, +180bps area.

   

• B&G Foods is working on a $500m 5NC2 deal via Barclays, DB, BofA, RBC, BMO, Citi, GS and JPM. 

   

• Hunt Oil Peru is working a on $435m 10y deal via BofA.  Ba1/BBB.  Price talk: 8.875%-9%.

   

• Intuit is working a on 4-part 3y., 5y, 10y and 30y benchmark via BofA, JPM and MS.  A3/A-.  Price talk: +75bps area, +95bps area, +125bps area, +145bps area.

   

• American Tower is working a 5y and 10y benchmark via Barclays, MIZ, RBC, SocGen and TD.  Baa3/BBB-/BBB+.  Price talk: +165bps area, +190bps area.

   

• Horace Mann is working on a $300m 5y deal via JPM and PNC.  Price talk: +287.5bps area.

   

• Brooklyn Union Gas is working on a $400m 10y deal via BNPP, JPM and NatWest.  Baa2/BBB+/BBB+.  Price talk: +235bps area.

   

• Monogahela Power is working on a $400m 10y FMB deal via MS, PNC and RBC.  A3/A-/A-.  Price talk: +190bps area.

   

• Corebridge Financial is working on a 10y benchmark via Citi and JPM.  Baa2/BBB+/BBB+.  Price talk: +205bps area.

   

• CADES plans a USD 3y Social bond at swaps +34bps. Leads are BNPP, CA, DB and JPM.

   

• KBC Group plans a USD 11y NC10 at around Treasuries +230bps. Leads are BNPP, Barclays, GS, JPM and KBC.

   

• FWD Group (Baa2/BBB) is preparing a USD 10y through HSBC, JPM, MS, Mizuho and StanChart.

   

• Vistra Operations plans a USD 10y Secured at around Treasuries +305pbs. Leads are BMO, Citi and Mizuho.   

   

• Nissan Motor (Baa3/BBB-) is preparing USD 3y and 5y bonds in the area of Treasuries +270 and 300bps, respectively. Leads are BofA (B&D), Mizuho, SocGen, USB and WFS.  

   

• New York Life plans USD FA-backed 3y and 3y floating rate notes at around Treasuries +90bps and SOFR equivalent. Leads are Barclays, BofA, Citi and MS. 

   

• GTCR plans to raise about $4bn in high yield secured USD, EUR and GBP debt for its purchase of Worldpay Inc. Leads include Citi, DB, GS, JPM, UBS and WFS.  

   

• Korea Southern Power (Aa2/AA-) is preparing a USD 3y via Citi, Mizuho and Nomura after meeting investors on Sep 12.

   

• Sharjah is preparing a $750m 10.5y Sukuk at Treasuries +180bps through ADCB, ABKGCO, DUBAII, ENBD, GIB, HSBC, SIB and StanChart.

    

• Turkiye’s TSKB launched a $300m 5y Sustainability bond at 9.5%. Leads are ABKGCO, BNPP, Citi (B&D), Commerzbank, ING, MS, SMBC Nikko and StanChart.

   

• Slovenia (A3/AA-) launched a $1bn 10y at Treasuries +80bps through Barclays, BNPP, Citi, DB, GS and JPM.  Books above $2.2bn.

   

• IDB Invest priced a $500m 5y Global at swaps +54bps. Leads are BofA, Citi, Nomura and TD. Aa1/AA+/AAA.