Some bankers had hoped the EU's two-part eight and 20 year deal issued on Tuesday would help bring a degree of stability to the market after a rough week, but it is too early to say if that has been the case, said traders.
The EU’s 25 year was trading flat to reoffer and the eight year was a bit tighter, but there were sellers in both bonds — both real money and trading accounts.
“It shows there’s no real strong conviction,” said one dealer who said that the deals were issued following a considerable 7bp-8bp widening and were priced with a good concession. “People were optimistic this would settle market but so far it definitely hasn’t.”
With Land NRW compelled to postpone its own €3.5bn two-part 10 and 20 year syndication on Wednesday once Finland also appeared in the market, it was clear how skittish the market still was.
Bankers reported small selling in KfW and EIB bonds by a few accounts who “wanted to trim their positions” but the same person said the Street was still too long which was a matter of concern for him.
He was, however, hopeful that 10 year Bund yields would soon stabilise following the steep sell-off from the late March low of minus 0.40% to around 30bp higher this week.
It is believed there will be resistance to any further selling at around the minus 0.08%-0% area once the central bank steps in. “I think yields may stop rising soon,"said trader. "The ECB won’t tolerate it and we’ve definitely seen some official buying."