### POV, SWAP SPDS: HOW LOW CAN THEY GO....>

US SWAPS: ### POV, SWAP SPDS: HOW LOW CAN THEY GO

- Spds resume narrowing, short end making new three year lows (all-time low of

3.94 on 2/28/16) largely tied to surge in swappable corporate (could top $90B

for month, >$83B so far) while Tsy bill issuance has been high. Session flow

supportive for move in front end (better receivers in 2s around 2.6025-2.6037,

2s5s7s payer flys), accts fading move via payers out the curve, deal-tied

selling keeping levels relatively range-bound.  

- Levels are narrowing out the curve as well but are well within more recent

historicals (10Y spds inverted mid-2015, through all of 2016 and most of 2017

and early 2018). Continued drop in 3M LIBOR (-0.0076 to 2.6386%, -0.0366 last

wk) is another factor to consider, while FRA/OIS spds also narrow (3M 20.10

compares to Sep 2018 low of 19.30; held mid-teens from 2012 through much of

2015). Partially tied to technicals, front end unlikely to invert, but may

narrow further given supply dynamics. Some dealers starting to pick up on

historicals, Wells Fargo advocating wideners as easing fin regs' "could give

dealers the capacity to warehouse more Treasuries."