Preview: Swedish T-bill auction Emil Leifsson Manja Otto Alexander Reneby Rates Sales Rates Sales Rates Sales elei@danskebank.dk manot@danskebank.dk alre@danskebank.dk 15 March 2017 1
Wednesday, 15 th of March, Sweden is set to sell 10bn of the SWTB 20 September 2017. Current outstanding Swedish T-bills and outstanding amounts ISIN Maturity Rating Outstanding Amt (SEK bn) SE0008964456 15-Mar-17 AAA 30.00 SE0009496060 19-Apr-17 AAA 20.00 SE0009580178 17-May-17 AAA 17.50 SE0009346273 21-Jun-17 AAA 14.39 SE0009664501 20-Sep-17 AAA 7.50 Total outstanding: 89.39 Riksgalden estimates an average outstanding T-bill stock in 2017 of (SEK bn): This means that Riksgalden is currently above this estimate by (SEK bn): 88.00 1.39 Auction Calendar Auction Date Maturity ISIN Volume (SEK bn) 15-Mar-17 20-Sep-17 SE0009664501 10 12-Apr-17 10 26-Apr-17 10 10-May-17 10 - Data from www.riksgalden.se - Data on Debt Estimates is taken from Riksgalden s website on Government borrowing 2
Historical auction results At the last auction, the cut-off rate on SWTB 20 September 2017 was -0.6420%, whereas the average rate was -0.6599%. Auction results from the last nine auctions Date Maturity Bid (bn) Sale (bn) Bid-to-Cover Cut-off rate Avg rate 1-Mar-17 20-Sep-17 13.38 7.50 1.78-0.6420% -0.6599% 15-Feb-17 17-May-17 9.41 7.50 1.25-0.6610% -0.6735% 1-Feb-17 17-May-17 17.08 10.00 1.71-0.7000% -0.7260% 18-Jan-17 19-Apr-17 13.58 10.00 1.36-0.7630% -0.7747% 4-Jan-17 19-Apr-17 16.30 10.00 1.63-0.8220% -0.8493% 21-Dec-16 15-Mar-17 9.37 5.00 1.87-0.9300% -0.9506% 21-Jun-17 4.89 4.39 1.11-0.8800% -0.9176% 7-Dec-16 21-Jun-17 23.98 10.00 2.40-0.8530% -0.8716% 23-Nov-16 15-Feb-17 24.87 10.00 2.49-0.8300% -0.8427% 9-Nov-16 15-Feb-17 20.81 10.00 2.08-0.8110% -0.8189% Data from www.riksgalden.se 3
Swap levels into EUR, USD and GBP In order to illustrate the swap level into EUR, USD and GBP on this new bill, we assume the same cut-off rate as at the last auction (-0.6420%). FX Carry Yield Name Yield Maturity EUR USD GBP In EUR In USD In GBP SGB 0 20SEP2017-0.6420% 20-Sep-17 0.11% 1.93% 0.93% -0.54% 1.28% 0.28% The table below shows the pick-up that investor receives compared to buying Bubills, BTFs, BOTS, Treasuries or Gilts. Pick-up to: Name Yield Maturity BPV Bubill BTF BOTS Treasuries Gilts SGB 0 20SEP2017-0.6420% 20-Sep-17 0.52 0.40% 0.21% -0.22% 0.40% 0.37% 4
EURSEK: Yield enhancement from Fx Forward EURSEK 3M and 6M forward points Annualised carry from FX Fwd, bps Source: Bloomberg, Macrobond and Danske Bank Markets 5
USDSEK: Yield enhancement from Fx Forward USDSEK 3M and 6M forward points Annualised carry from FX Fwd, bps Source: Bloomberg, Macrobond and Danske Bank Markets 6
GBPSEK: Yield enhancement from Fx Forward GBPSEK 3M and 6M forward points Annualised carry from FX Fwd, bps Source: Bloomberg, Macrobond and Danske Bank Markets 7
13-Jan-16 27-Jan-16 9-Mar-16 23-Mar-16 6-Apr-16 20-Apr-16 18-May-16 1-Jun-16 15-Jun-16 29-Jun-16 3-Aug-16 17-Aug-16 31-Aug-16 14-Sep-16 28-Sep-16 7-Dec-16 21-Dec-16 1-Mar-17 13-Jan-16 27-Jan-16 10-Feb-16 24-Feb-16 9-Mar-16 23-Mar-16 6-Apr-16 20-Apr-16 3-May-16 18-May-16 1-Jun-16 15-Jun-16 29-Jun-16 3-Aug-16 17-Aug-16 31-Aug-16 28-Sep-16 12-Oct-16 26-Oct-16 9-Nov-16 23-Nov-16 21-Dec-16 4-Jan-17 18-Jan-17 1-Feb-17 15-Feb-17 Past one year 6 month and 3 month T-bill auctions Comparing cut-off rate with total sold amount Cut-off rate and total sale of 6 month T-bills 1 Cut-off rate and total sale of 3 month T-bills 2 0.00% 14 0.00% 16-0.10% -0.20% -0.30% 12 10-0.10% -0.20% -0.30% 14 12-0.40% 8-0.40% 10-0.50% -0.50% 8-0.60% 6-0.60% 6-0.70% -0.80% -0.90% 4 2-0.70% -0.80% -0.90% 4 2-1.00% 0-1.00% 0 Sub 6mth - Sum of Cut-off rate Sub 6mth - Sum of Avg Yld Sub 3mth - Average of Cut-off rate Sub 3mth - Average of Avg Yld Sub 6mth - Total Sale (bn) (rhs) Sub 3mth - Total Sale (bn) (rhs) Data from www.riksgalden.se 1) This is the T-bill with longer maturity on auction day 2) This is the T-bill with shorter maturity on auction day 8
13-Jan-16 27-Jan-16 9-Mar-16 23-Mar-16 6-Apr-16 20-Apr-16 18-May-16 1-Jun-16 15-Jun-16 29-Jun-16 3-Aug-16 17-Aug-16 31-Aug-16 14-Sep-16 28-Sep-16 7-Dec-16 21-Dec-16 1-Mar-17 13-Jan-16 27-Jan-16 10-Feb-16 24-Feb-16 9-Mar-16 23-Mar-16 6-Apr-16 20-Apr-16 3-May-16 18-May-16 1-Jun-16 15-Jun-16 29-Jun-16 3-Aug-16 17-Aug-16 31-Aug-16 28-Sep-16 12-Oct-16 26-Oct-16 9-Nov-16 23-Nov-16 21-Dec-16 4-Jan-17 18-Jan-17 1-Feb-17 15-Feb-17 Past one year 6 month and 3 month T-bill auctions Comparing cut-off rate with bid-to-cover ratio Cut-off rate and bid-to-cover of 6 month T-bills 1 Cut-off rate and bid-to-cover of 3 month T-bills 2 0.00% 3 0.00% 4.5-0.10% -0.20% 2.5-0.10% -0.20% 4 3.5-0.30% -0.40% -0.50% -0.60% -0.70% 2 1.5 1-0.30% -0.40% -0.50% -0.60% -0.70% 3 2.5 2 1.5-0.80% -0.90% 0.5-0.80% -0.90% 1 0.5-1.00% 0-1.00% 0 Sub 6mth - Cut-off rate (lhs) Sub 6mth - Avg Yld (lhs) Sub 3mth - Cut-off rate (lhs) Sub 3mth - Avg Yld (lhs) Sub 6mth - Bid-to-cover (rhs) Sub 3mth - Bid-to-cover (rhs) Data from www.riksgalden.se 1) This is the T-bill with longer maturity on auction day 2) This is the T-bill with shorter maturity on auction day 9
APPENDIX 10
Example: Swapping SWTB 0 09/20/17 Appendix The client wants to buy SGB 0 20SEP2017 (SE0009664501) for 100mio USD. USD/SEK spot trades at 8.9571, so this is equals 895.71mio SEK 1 At a price of -0.642% (100.34) the notional amount will be 892.71mio SEK Client 892.71mio SEK SGB 0 20SEP2017 2 The client hedges his FX risk by doing a forward USD/SEK FX-swap, where the payment date on the FX is matching the maturity day on the bond (20-Sep-17) Client Forward FX-swap Bank 3 4 The 20-Sep-17 USD/SEK forward trades at 8.8677 (-894 pips). At maturity the client converts the 892.71mio SEK back into USD at 8.8677 -> this gives him 100.67mio USD In annualized yield terms this is 1.28%¹ ¹(100.670 100) / 100 / (Days-to-maturity / 360) =1.28% 11
Pricing, bids and allotment Appendix Auction guidelines taken from www.riksgalden.se: Allocation at auctions takes place according to the multi-price auction method; i.e. allocation at the interest rate offered. When the auction close, the bids are placed in rank order from the lowest to the highest interest rate. The bids which in terms of volume are below the auction volume published in advance receive an allocation. The bids which are on the margin and have the same interest rate as the highest accepted level are reduced in percentage terms so that the issued volume does not exceed the volume we wish to sell. Auction terms are published a week before the auction takes place at 4.20 pm on our website. Auction results for all government securities are published around three minutes after the auction closes, i.e. around 11.03 am on our website 12
Disclaimer This communication has been prepared by personnel in the Sales and Trading departments of Danske Bank A/S. Sales and Trading department personnel are not research analysts, and the information in this communication is not intended to constitute research as that term is defined by applicable regulations. This communication constitute a short term recommendation and has as such not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of the communication. This communication is for the general information of our clients and is a "solicitation" only as that term is used within CFTC Rule 23.605 promulgated under the U.S. Commodity Exchange Act. Unless otherwise expressly indicated, this communication does not take into account the investment objectives or financial situation of any particular person. Danske Bank A/S is not acting as an advisor, fiduciary or agent. Recipients of this communication should obtain advice based on their own individual circumstances from their own tax, financial, legal and other advisors about the risks and merits of any transaction before making an investment decision, and only make such decisions on the basis of the investor's own objectives, experience and resources. Danske Bank may hold a position or act as market maker in any financial instrument discussed herein. Prices and availability are indicative and may change without notice. 13