HALISTER1: India 12-Month Bond Outlook Lowered to ‘Neutral’ at StanChart

India 12-Month Bond Outlook Lowered to ‘Neutral’ at StanChart

(Bloomberg) -- India’s 12-month bond outlook has shifted to “neutral” from “positive”, Nagaraj Kulkarni, senior Asia rates strategist at Standard Chartered Bank writes in note dated Jan. 6.
  • 2017 likely to be a tale of two halves for bond market
    • Govt bonds to rally in 1H 2017 on monetary policy easing; a likely 50bps repo rate cut should result in a decline of ~20bps in 10-year yield
    • Bond yields to rise in July-December as impact of demonetisation drive fade and a cyclical pick-up in inflation is likely in 2H 2017
  • Monetary tightening unlikely in 2017 as headline inflation is likely to remain within RBI’s target range of 2-6% with 4% being the medium-term target
  • Expects yield curve to steepen in 2H 2017, signaling the end of the current monetary easing cycle and reflecting unfavorable demand-supply dynamics
  • 3-month outlook on govt bonds is “positive”
  • Yield on 10-year govt bond rises 3bps to 6.42%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Nagaraj Kulkarni (Standard Chartered PLC)

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HALISTER: Citic-Carlyle to Buy McDonald’s China, H.K. Ops in $2.08b Deal

Citic-Carlyle to Buy McDonald’s China, H.K. Ops in $2.08b Deal

(Bloomberg) -- Citic to own 52% of McDonald’s China, Hong Kong businesses, Carlyle to own 28% upon completion of the acquisition, while McDonald’s holds remaining 20%, Citic says in filing to stock exchange.
  • This investment offers a chance to deepen Citic’s exposure to the consumer sector: statement
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
MCD US (McDonald's Corp)
267 HK (CITIC Ltd)
CG US (Carlyle Group LP/The)

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(2) *CITIC-CARLYLE TO BUY MCDONALD’S CHINA, HONG KONG OPS FOR $2.08B

*CITIC-CARLYLE TO BUY MCDONALD’S CHINA, HONG KONG OPS FOR $2.08B

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

Tickers
267 HK (CITIC Ltd)
CG US (Carlyle Group LP/The)
MCD US (McDonald's Corp)

People
Chang Zhenming (CITIC Corp Ltd)

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HALISTER1: INDIA RATINGS: Asian Solvochem Cut; Bhavya Cements Raised

INDIA RATINGS: Asian Solvochem Cut; Bhavya Cements Raised

(Bloomberg) -- Here’s a roundup of Indian co. debt-rating changes.
  • To get this story sent to your inbox real-time, run NI INRATINGS , click on Display & Edit, then Set Alert Delivery
DOWNGRADE
  • Asian Solvochem
    • Non-fund based limits cut to BB from BB+ at ICRA
    • Cites drop in operating income
UPGRADES
  • Bhavya Cements
    • Long-term bank facilities raised to BB+ from BB at Crisil
    • Cites higher capacity utilization, sales volume
  • Gujarat Eco Textile Park
    • LT bank facilities raised to B- from D at Crisil
    • Cites timely servicing of debt due to improved liquidity
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
0990976D IN (Bhavya Cements Ltd)

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HALISTER: McDonald’s Said to Sign Deal Today to Sell $2b China Franchise

McDonald’s Said to Sign Deal Today to Sell $2b China Franchise

(Bloomberg) -- McDonald’s Corp. plans to sign an agreement as soon as today to sell 80% of its operations in China and Hong Kong to a consortium of Carlyle and Citic Group, people with knowledge of the matter said.
  • Deal, which includes 20-year franchise rights, values the business at about ~$2b including debt, said the people, who asked not to be identified because the information is private
  • McDonald’s will retain 20% stake in China business: people
  • Deal could be announced this week: people
  • A Shanghai-based spokeswoman for McDonald’s didn’t immediately answer a phone call and an e-mail seeking comment
  • Representatives for Carlyle, Citic declined to comment
  • NOTE: TPG Said to Exit Race for $2 Billion McDonald’s China Rights
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
MCD US (McDonald's Corp)
CITIC CH (CITIC Group Corp)
267 HK (CITIC Ltd)
CG US (Carlyle Group LP/The)

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HALISTER1: European Credit Volatility May Trend Higher as Periphery Exposed

European Credit Volatility May Trend Higher as Periphery Exposed

(Bloomberg) -- The volatility of iTraxx Main may be set to rise given the diminishing risk/reward for further credit tightening as peripheral spreads face widening pressures from rising political risks, Bloomberg strategist Tanvir Sandhu writes.
  • Legal hurdles faced by the ECB due to risks of contravening the Maastricht Treaty’s prohibition of monetary financing may also push up volatility in the iTraxx Main index
  • 1-month realized vol on iTraxx Main, an index of credit- default swaps on investment-grade companies, is in the lower quartile of 5-year range and may move higher as local vol shocks may become more common, see chart here
  • While the ECB protects the extreme right tails with CSPP and with any widening likely to be contained, investors may become reluctant to sell vol given the rising political risks
  • BTPs may trade more like credit instruments vs duration assets in the second half of 2017 to price further QE tapering risks in 2018
  • Realized 1-month volatility of BTP futures is at ~8 vs ~4 in September, which was near the lowest levels on record
  • Regression analysis for BTP/bund vs 5Y iTraxx Main prior to ECB QE had R^2 = 0.955, y = 2.387x-21.228 , while after R^2 = 0.056, y = 0.359x+98.518, see here
  • Other risks that may squeeze longs include acceleration in issuance offsetting ECB buying, oil volatility and a dollar- strength driven weakness in emerging markets
    • 1y regression analysis for WTI vs 5Y iTraxx Main prior to ECB CSPP announcement on March 10, 2016 had R^2 = 0.608, y = -0.599x+96.755
  • NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

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