HALISTER1: Fed Next Hike Seen in September Though March Not Ruled Out: MS

Fed Next Hike Seen in September Though March Not Ruled Out: MS

(Bloomberg) -- While the Fed is more likely to raise rates again in September, it could go sooner if there’s a “meaningful” drop in the unemployment rate and higher inflation than currently projected, Morgan Stanley economists and strategists led by Ellen Zentner, Matthew Hornbach wrote in note Friday.
  • Morgan Stanley reaffirms its November forecast for two rate hikes in 2017, in September and December; sees unemployment rate fluctuating ~4.8% in near term, YoY growth in core PCE to remain “under pressure” in early 2017
    • Even so, raises possibility that its forecasts on unemployment, inflation could turn out wrong
  • Two factors that could force Fed to move as early as March are higher readings on core PCE inflation, “meaningful undershoot” of NAIRU
    • Both developments could lead to shift that makes Fed less willing to let pressures build
  • UST market isn’t priced for a March hike, is fully prepared for one in June; market could sell off further if data encourages Fed to act in March
    • March hike would still be consistent with “gradual” removal of accommodation
  • Policy-sensitive rates now offer enough protection to consider longs, should perform “very well” even if Fed doesn’t move in March
  • Market’s misread of average hourly earnings data presents opportunity to overweight 2Y-5Y sector of UST curve
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Ellen Zentner (Morgan Stanley)
Matthew Hornbach (Morgan Stanley)

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UUID: 7947283

HALISTER: Tullow Oil Agrees $900m Uganda Asset Transfer With Total

Tullow Oil Agrees $900m Uganda Asset Transfer With Total

(Bloomberg) -- Tullow to transfer 21.57% interest in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total for total consideration of $900m, Tullow says in statement.
  • Tullow to retain 11.76% interest in upstream and pipeline **Would reduce to 10% when Uganda government exercises right to back-in
  • Tullow shares rise as much as 8.4%
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
FP FP (TOTAL SA)
TLW LN (Tullow Oil PLC)

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UUID: 7947283

HALISTER1: USD 30y Swaps, Long-Tenor Vols Seen Pressured by Formosa Sales

USD 30y Swaps, Long-Tenor Vols Seen Pressured by Formosa Sales

(Bloomberg) -- An expected pickup in issuance of callable dollar debt, including Formosa bonds, in the coming weeks may tighten long-end USD swap spreads and pressure implied long-tenor rates vols lower, analysts say.
  • National Bank of Abu Dhabi raised $885m toward the end of last week in 30-year callable bonds listed in Taiwan
    • 30-year USD swap spreads quickly narrowed by about 1.5bps as the swap curve flattened once the market opened following the deal in London; Tokyo markets closed today for holiday
  • Expect valuations at the bottom right of the USD rates-vol grid to be driven by vega supply as we head into what’s typically the busiest few weeks of callable supply for the year, JPMorgan strategists wrote in a note dated Jan. 7
    • “While January should once again represent the heaviest month of the year, a somewhat earlier than usual Chinese New Year should push some of that issuance back a few weeks”
  • Citigroup says in note that January normally sees an issuance surge in long-dated callables, including Formosa; dealers normally hedge associated swaps by receiving in 30y, which has a direct negative impact on 30y spreads
    • Gross issuance of long-dated callables this January should be smaller than last year because most of the bonds eligible for redemption are unlikely to be called after the recent market selloff: Citi
  • BofAML sees the potential for still-elevated Formosa supply in 2017, which they expect to pressure implied vols lower especially in expiries of more than 6 years on long tails
  • NOTE: Formosa bonds are foreign-currency securities sold in Taiwan, targeting Asian investors looking to enhance yields; issuance of Formosa and other dollar debt with call options creates volatility supply to the market
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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UUID: 7947283

HALISTER1: CPS Auto Receivables Trust 2017-A - DBRS Presale Report

CPS Auto Receivables Trust 2017-A - DBRS Presale Report

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

People
Chris Donofrio (Dbrs Inc)
Chris O'Connell (DBRS Inc)
Christopher D'Onofrio (DBRS Inc)
Maxim Berger (DBRS Inc)

Topics
Credit Analysis Research
Credit Research
Fixed Income Research
Investment Research
Reports

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UUID: 7947283

HALISTER1: U.S. Structured Finance Newsletter - Department of Energy Issues Best Practices Guidelines For Residential PACE

U.S. Structured Finance Newsletter - Department of Energy Issues Best Practices Guidelines For Residential PACE

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

People
Charles Weilamann (DBRS Inc)
Chris Donofrio (Dbrs Inc)
Chris O'Connell (DBRS Inc)
Christopher D'Onofrio (DBRS Inc)
Claire Mezzanotte (DBRS Inc)

Topics
Credit Analysis Research
Credit Research
Fixed Income Research
Industry & Sector Research
Investment Research

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UUID: 7947283