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The effect of the ECB interest rate rise yesterday (Thursday) on the euro swap markets was not as dramatic as might have been expected, reported swap dealers.
Overnight rates were lifted to a five year high of 3.5% and most onlookers expect another increase in the first quarter of next year.
Dealers reported heavy flow -- one saying that it was the busiest day of the year -- but the swap curve changed little. The front end futures contracts sold off, but the remainder of the curve was more or less unchanged.
"It had surprisingly little effect," said a dealer in Frankfurt. The 2s/10s curve flattened a touch to 4.5bp, but traders pointed out that this was not very different from prices at the end of Wednesday.
The 2s/5s is at 1bp, while the 10s/30s has flattened to 10.8bp.
In the new issue market, BNP Paribas Covered Bonds launched the first issue of its recently unveiled covered bond programme. It sold a Eu2.5bn five year note at 18.3bp over the OBL 149.
This was equivalent to mid-swaps less...