USD Swaps: Static start to big week

Fed sign 25 Mar 2021
The raft of stronger-then-expected data on Friday provided a gentle Monday morning hangover for fixed income markets today.

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  • Static start to big week

  • Barclays: FOMC to show tightening bias

  • New issues


    Static start to big week

    The raft of stronger-then-expected data on Friday (Empire manufacturing, import prices, industrial production etc) continued to weigh on fixed income markets today following the subsequent 2.5bps rise in 10y yields at the end of last week’s trading.


    So far today the 10y yield is 1bp higher at 4.343%, and so far this London morning it has only really mustered a 1bp trading range, and if market pricing is anything to go by there may be less volatility than usual in the run-in to the latest FOMC rates decision in two days time.


    With second-tier data only on offer this week, it may have to look elsewhere if it going to burst into life at some point this week. Currently the 2s10s UST curve has bear-flattened 1.5bps to -71.5bps and 10s30s is -0.5bps at +8bps.


    In swap spreads the 2y is -0.125bps at -10.25bps, 5y was -0.125bps at -22.625bps, 10y is -0.5bps at -32bps and 30y is -0.5bps at -69bps.


    Barclays: FOMC to show tightening bias

    Taking a long look at what might happen come Wednesday’s FOMC decision, strategists at Barclays said ‘not very much’ – not in terms of actual rate changes anyway.


    In summary, Barclays said that: “we expect the FOMC to keep rates unchanged next this week, but to maintain a tightening bias and project a last hike before year-end in light of resilient demand, the still-tight labor market, and slowly declining inflation. We expect the FOMC to deliver the 25bp hike in November and to be on hold until September 2024.”


    It added that:

    • “Despite an acceleration in activity in the summer, we expect the FOMC to leave policy rates unchanged this week, as inflation is gradually declining and labor market conditions are slowly moderating.”


    • ”However, we think the FOMC will retain the tightening bias in its statement ("In determining the extent of additional policy firming ...") and leave the median 2023 dot unchanged at 5.6% in its fresh Summary of Economic Projections (SEP), suggesting it is ready to hike the federal funds rate 25bp again before year-end.”


    • ”In light of the very resilient demand and the still-tight labor market, we expect the FOMC to revise up its 2024 dot, from 4.6% to 4.9%.”


    New issues:

    • Worldpay plans a $2bn, 7yNC3 bond at around 89% via lead manager JPM and a host of other banks. It also plans a £700m, 7yNC3 tranche.


    • UBS plans a three-tranche USD benchmark bond issue consisting of 4.25yNC3.25, 6yNC5  and 11yNC10 tranches. Price talk is +175, +200 and +220bps respectively.


    • The Sydney-based NBN Corp plans a USD 144A 5y and/or 10y bond issue via BofA, Citi, JPM and MUFG.


    • Hyundai Capital plans a four-tranche USD benchmark bond (3y FRN, 3y, 5y and 7y fixed)  issue via BNPP, BofA, HSBC, JPM, Lloyds and MUFG.


    • LG Energy plans a 144A Green bond including 3y at +140bps or so and 5y at +170bps. Via BofA, Citi, MS, Standard Chartered and KDB.


    • FWD Group plans a 10y benchmark 10y, 144A bond at around 290bps via HSBC, JPM, Mizuho, MS and Standard Chartered.