Halister News

(Bloomberg) -- (Adds Bloomberg Intelligence, BofA, FTN, RBC to item published Jan. 27.)

• FOMC will likely keep rates unchanged Feb. 1 as policy makers await more detail on Trump administration’s policies, based on published research by economists and strategists; pre-FOMC meeting commentary focuses more on Fed’s portfolio.
• Debate on ending reinvestments will probably continue at Jan. 31-Feb. 1 meeting, yet won’t be mentioned in statement, says Standard Chartered economist Thomas Costerg
  • Market will likely be especially looking at fifth paragraph on outlook for balance sheet, reinvestment policy: JPMorgan economist Michael Feroli; language is poised to stay same
• See also Research Roundup: Fed could shrink balance sheet, cause UST volatility
• Market-implied probabilities for next hike are below 50% through May meeting; fed fund futures fully pricing in a 25bp increase ~June; Jul17 implied rate ~88bps, above midpoint of 75bp-100bp target range

• Barclays (Michael Gapen, Rob Martin, Blerina Uruci)
  • Fed will take definite stand on labor market
  • Statement will reflect view that labor market is at or near full employment
  • Barclays still expects any balance-sheet reduction to occur through partial rollover of maturing securities; “outright assets sales are extremely unlikely”
  • MORE

• Bloomberg Intelligence (Michael McDonough)
  • Fed to settle on same outcome as BOE and BOJ this week: no change in policy and updates to economic assessments
  • U.S. economy’s continued “encouraging” acceleration in YoY growth trend will be enough to keep Fed on gradual tightening path, yet probably at slower pace than projected in December
  • MORE

• BofA (Michelle Meyer, others)
  • Statement will reflect greater conviction about reduced labor-market slack, upward trend of inflation
  • Delays in fiscal stimulus, potentially greater trade tensions lead to “out-of-consensus” forecast for slow growth of 1.5% in 1H
  • BofA still expects one rate increase this year, likely in September; says second hike in 2017 could be “close call”
  • MORE
  • Fed hasn’t pulled forward timing for ending reinvestments, despite recent mention of policy in its communications: Meyers, others in Jan. 30 note; likely to taper reinvestments when fed funds target range is 1.25%-1.5%, will signal to markets “well in advance”

• FTN (Christopher Low)
  • “No rate hike and no significant change in guidance” expected
  • FOMC also won’t be able to signal clear intent to hike in March, given committee’s commitment to using neutral rate as policy guide
  • Policy makers are already ~50bps above the last neutral rate, based on data rather than forecast; “doesn’t make sense to hike again until the gap shrinks a bit”

• JPMorgan (Feroli)
  • Forward guidance to repeat outlook for “gradual” hikes
  • Statement will likely stop short of speculating on a move in March; overall tone should remain upbeat
  • FOMC to say risks to outlook are “roughly balanced,” and “play it safe” by not speculating on any changes to fiscal or other federal economic policies
  • MORE

• Morgan Stanley (Ellen Zentner, Matthew Hornbach, others)
  • Fed will likely hold off on raising rates until September
  • Odds of March hike appear low as Fed looks for inflation pressures to build and fiscal policy to take hold
  • Policy makers will deliver “positive-sounding,” “benign” statement keeping fed funds rate at 0.5%-0.75%
  • MORE

• RBC (Tom Porcelli)
  • No Yellen press conference means “little scope” for major shifts; meeting should “come and go with little market implications”
  • Fed may upgrade inflation description with slightly more hawkish slant; “way too early” for reinvestment discussion to make its way into the statement
  • Looking ahead, there’s “good chance” Fed will talk more about balance-sheet reduction rather than hiking outright in March; “very strong data,” “clear signs” that fiscal/tax reform is on accelerated timeline are needed for March hike to occur

• Standard Chartered (Costerg)
  • Fed will likely discuss timing of balance sheet’s “passive shrinking”
  • Issue may appear in minutes of meeting, may be further discussed at March meeting
  • Fed will keep rates on hold for several months; Standard Chartered sticks with prior call for next hike in December, sees end of reinvestments in 1Q 2018
  • MORE

(Bloomberg) -- While Grupo Posadas expects peso weakness to lure more tourists to company’s hotels this quarter, Gimme Credit says the FX impact will “significantly” raise total debt by year-end and lead to “worse” credit ratios, analyst Cedric Rimaud writes in Jan. 30 note.

• Rimaud cuts view on Grupo Posadas 7.875% bonds due in 2022 to “underperform” from “outperform”
• NOTE: Jan. 24: Mexico’s Posadas expects 15% y/y rise in tourists in 1Q
• Increase in total debt in local currency terms driven by FX depreciation “is a worry,” Rimaud writes
• Gimme Credit “skeptical” that company will see expected impact on revenue because most of Grupo Posadas’ hotels are aimed at business travelers in urban areas and thus more dependent on economic prospects
• Mexico economy expected to grow more slowly in 2017 due to uncertainties related to trade and higher interest rates, which pressure consumption, Gimme Credit says

(Bloomberg) -- Group including an ex-HBOS Plc banker and a turnaround consultant have been found guilty in fraud and corruption trial that lost the bank approximately GBP250M.

• London jury delivers verdict today, Crown Prosecution Service says in a statement
• HBOS bankers accused of accepting gifts that allowed co- conspirators to take control of troubled businesses and bankrupt them
• Turnaround consultant David Mills, 60, convicted of conspiracy to corrupt, fraudulent trading and conspiracy to conceal criminal property
• Ex-HBOS employee Lynden Scourfield, 54, pleaded guilty to conspiracy to corrupt, conspiracy to launder the proceeds of crime and four counts of fraudulent trading in August 2016
• Michael Bancroft and John Cartwright, were convicted of conspiracy to corrupt, fraudulent trading and conspiracy to conceal criminal property
• Ex-HBOS banker Mark Dobson and Mills’ wife also convicted
• Jonathan Cohen, 60, was acquitted of fraudulent trading and conspiracy to conceal criminal property
• SEE: Ex-HBOS Bankers Accused of Getting Travel, Escorts in Fraud Link

--CHRIS ELSER

(Bloomberg) -- U.S. index of pending home sales seen rising 1.1% in Dec. after declining 2.5% in Nov. (forecast range -1.8% to +2.5%); leading indicator of existing home sales, tracks new contracts for single-family homes, condos, co-ops.

• In Nov., sales dropped in three of four regions