HALISTER1: AUCTION PREVIEW: 7-Year BTP Seen Cheap on Relative Value Basis

AUCTION PREVIEW: 7-Year BTP Seen Cheap on Relative Value Basis

(Bloomberg) -- Italy to sell 0.05% 10/2019 for EU2.5-3b, 0.65% 10/2023 for EU2.25-2.75b, 2.25% 09/2036 for EU1-1.5b at 11am CET, equivalent to around EU4m/01 in risk, close to 40k BTP futures.
  • Analysts see 20y bond supported by rich repo levels, recent richening; 7y point seen offering value on the curve, though mixed views on front-end bond given impending DBRS review
  • Citi (Saumesh Dutta)
    • 7y sector is trading cheap vs fitted curve; bond has cheapened on the 05/2023-10/2023-05/2024 fly since last November and looks cheap since its issuance last September
    • 20y is trading rich vs fitted curve, although it has recently cheapened on the BTP 10s20s30s yield fly, it looks rich over an 8-month trading history, also offers limited RV
  • Mizuho (Antoine Bouvet)
    • Auction comes after threat of an additional referendum, on labour market reform, eased after yesterday’s court ruling, which helped market sentiment towards Italy
    • 7y sector stands at a cheap level compared to recent history, such as on 06/2021-08/2023-06/2025 butterfly, which should help support RV demand
    • 20y tap was anticipated due to its history of specialness on repo; richening on the curve late last year suggests demand for the bond and bodes well for today’s auction
  • BBVA (Jaime Costero)
    • 3y issue trades slightly rich on the fitted curve; cautious on the front end ahead of DBRS decision on Friday as a downgrade would raise ECB collateral haircuts and have negative potential implications for the front end of the curve
    • 2023 issue has cheapened cross-market vs Spain, wider by ~8bps vs SPGB 2023, though now trades in the middle of the spread ranges in place since October
    • Special pricing in repo may support appetite for the 20y issue; bond is fair value on the curve
  • Unicredit (Chiara Cremonesi)
    • Auction size is “contained”, potentially given expectations for the BTP volatility given the Court hearing and DBRS review
      • Low amount in the 20y BTP may signal that a new 15y benchmark is in the pipeline; see best window for this next week
    • ECB inclusion of maturities below 2y, should be supportive for front-end, tactically position for 12- month/3y flatteners
    • Like owning 7y area vs the 5y, as it offers 60bps of yield pick-up, slightly above the 2016 peaks
    • 20Y benchmark offers 31bps of yield pick-up vs. the 15Y benchmark, at the high end of the historical range
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
UCG IM (UniCredit SpA)

People
Antoine Bouvet (Mizuho Financial Group Inc)
Chiara Cremonesi (UniCredit SpA)
Jaime Costero (Banco Bilbao Vizcaya Argentaria SA)
Saumesh Dutta (Citigroup Inc)

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UUID: 7947283

(2) *CHINA ASSN SEES 29.4M UNITS VEHICLE SALES IN 2017, UP 5%

*CHINA ASSN SEES 29.4M UNITS VEHICLE SALES IN 2017, UP 5%

Alerts: HALISTER, HALISTER1
Source: BN (Bloomberg News)

Tickers
F US (Ford Motor Co)
600006 CH (DongFeng Automobile Co Ltd)
489 HK (Dongfeng Motor Group Co Ltd)
GM US (General Motors Co)
UG FP (Peugeot SA)

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HALISTER1: Dymon Hedge Fund Sees Dollar at 130 Yen on Fed After 56% Return

Dymon Hedge Fund Sees Dollar at 130 Yen on Fed After 56% Return

(Bloomberg) -- Dymon Asia Capital (Singapore), which reaped a 56% return in 2016 betting on a stronger dollar, predicts USD/JPY rally will extend to a 15-year high of 130 as investors are underestimating the pace of U.S. policy tightening.
  • The Fed is set to raise interest rates up to four times in 2017, starting in March, should President-elect Donald Trump fulfill his pledge to unleash lower taxes and fiscal spending, said Danny Yong, chief investment officer of the Singapore-based hedge fund
    • This will boost 10-year Treasury yields to at least 3.5%
  • Yong, who is also bullish on gold, holds a bearish view on the currencies of China, South Korea, Singapore and Taiwan
    • Expects the yuan to fall to 7.50 this year against the dollar, the weakest level since 2007
    • This recovery is very positive for the U.S., but likely to be partially at the expense of the rest of the world, especially nations which are heavily dependent on exports,’’ Yong said.
  • See story NSN OJNIY56K50XZ
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
0381417D SP (Dymon Asia Capital Singapore Pte Ltd)

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HALISTER1: Dymon Hedge Fund Sees Dollar at 130 Yen on Fed After 56% Return

Dymon Hedge Fund Sees Dollar at 130 Yen on Fed After 56% Return

Alert: HALISTER1
Source: BN (Bloomberg News)

Tickers
0381417D SP (Dymon Asia Capital Singapore Pte Ltd)

People
Danny Yong (Dymon Asia Capital Singapore Pte Ltd)
Gerald Chan (Dymon Asia Capital Singapore Pte Ltd)

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UUID: 7947283