EUR Swaps: Volatile ahead of ECB

Computer lines code 30 Jan 2023
Bunds took a hit after a ECB sources report on inflation. Elsewhere, banks look at the medium-term outlook for swap spreads.

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


  • Volatile ahead of ECB 

  • Bund spread narrower - JP Morgan

  • New issues  


    Volatile ahead of ECB 

    Today was meant to be about US CPI data, but a Reuters sources story hit the screens beforehand with the newswire reporting that the ECB expects inflation to remain above 3% into next year.

    As a result, the Bund traded lower during the morning session and then took a further hit after US CPI printed at 14:30 CET, later recovering and last trading just 20 ticks lower on the session. At the front-end, white and red Euribors are trading up to 4.5bps lower.

    In swaps, the steepening momentum has stalled with the curve flatter and 2s/10s last down by 1.5bp at -55.25bps and 10s/30s down by 1.25bp at -35.75bps.

    Elsewhere, new issuance has seen a sharp slowdown ahead of the ECB meeting tomorrow. Bund asset swap spreads are steady across much of the curve with last prices vs 6mE, Bobl at 65.2bps (-0.3bp), Bund at 61.1bps (-0.3bp) and Buxl at 24.8bps (unch).


    Bund spread narrower - JP Morgan 

    Strategists at JP Morgan holds a medium-term narrowing bias on swap spreads. In its summary the bank writes: 


    • "We retain a medium-term narrowing bias on swap spreads across the curve which primarily refects our view of easing of financial conditions as we approach the end of the hiking cycle and the market transitions towards an easing cycle in 2H24 and beyond... we believe that markets are currently pricing too tepid a pace of rate cuts in reds and greens and we are biased towards fading this. The evolution of this over the medium should be supportive of narrower spreads overall, in a manner that is the reverse of the 2022 dynamic when aggressive hikes had pushed swap spreads wider.


    • "Nevertheless, we remain cognizant of several idiosyncratic factors impacting the different sector of the curves and therefore are cautious in outright narrowers currently. Other supportive factors are: a) the expected reduction in collateral scarcity, already reflected in a cheapening of funding rates; b) bias some from financial institutions to partly reverse the hedges implemented at the early stage of the tightening cycle."


    New issues

  • OMERS Finance Trust (OMERFT) plans EUR long-dated bonds after investor calls on 25 September. Leads are BNPP, Citi, CA and TD.

  • State of Saxony is pricing €500m 3y at swaps -16bps through BLB, DB, GS (B&D) and LBBW.