Halister News

(Bloomberg) -- Just days after Trump’s election prompted European rates markets to dump bets for more monetary easing, prices signal rising expectations ECB will relax the depo-rate floor on QE purchases to expand the pool of bonds it can buy.

• A slide in German short-dated yields has widened front-end swap spreads and bull-steepened the curve ahead of the Dec. 8 ECB meeting, even as Eonia pricing shows zero odds of the central bank cutting rates
  • That suggests the short-tenor rally is driven by factors specific to that part of the curve, possibly positioning for lower-yielding, near-dated bonds to become QE- eligible
• German 2-year yield fell 15bps in past two weeks, touching record lows; 2s10s curve bull-steepened 9bps in the period, as 10-year rates dropped only 7bps
  • However, the Schatz rally has also been supported by other factors such as a shortage of repo collateral
• 5-year yield has dropped back below the ECB depo rate, falling 11bps over past 7 sessions to -0.43%; 5s30s curve steepened 9bps in the period
• Yields on German bonds maturing up to and including July 2022 are below ECB’s deposit rate of -40bps, making them currently ineligible for purchases
• German bonds yielding below the ECB’s depo rate have shown significant outperformance vs swaps over the past 5 sessions
  • Since Nov. 18, 2-year invoice spreads have widened by 10bps to 58bps, touching highest levels since 2012; 5- year has widened 5bps to 53bps
    • Further out the curve, moves have been more muted, with 10y invoice spreads little changed, and 30y marginally tighter

Economic Release Details: {TWGDCONY Index ECOD} --ADELA LIN

(Bloomberg) -- It may be Black Friday, but rates traded in the red again overnight as U.S. treasuries reopen post Thanksgiving. Higher yield structure likely to weigh on risk asset sentiment, particularly in Euro periphery and emerging markets heading into weekend, Bloomberg strategist Simon Ballard writes.

• Credit spreads may struggle to tighten materially against rising yield backdrop, even as month-end dynamics come into play over next couple of sessions
  • Govt bond selloff continues to weigh on credit returns; Bloomberg Barclays EuroAgg 4.13% ytd total return as of Nov 24 vs 6.00% Oct 1
• Early close to U.S. market again Friday may damp EU credit volumes; U.K. 3Q GDP, Italian September retail sales and Spanish PPI data points may offer some direction

• Bloomberg Barclays Eur-Agg Corporate index closed Thursday at 124bps (flat); Bloomberg Barclays Eur HY index closed at 423bps (flat)
• CDX IG remained closed Thursday; iTraxx Asia Ex Japan IG is currently +0.7bps at 127.25 and iTraxx Australia quoted -0.6bps at 109.41

NEWS

• Corporate News
• Telekom Malaysia 3Q Net Income 159.8m Ringgit Vs 166.9m Rgt Y/y
• Pennon 1H Rev. Declines, Says On Track to Meet Forecasts
• B2 Holding 3Q Operating Profit Rise; Sees Portfolio Acquisitions
• Airasia Group CEO Fernandes Says Profits Are Sustainable
• Vietnam Airports Corp. 9-Mo. Net at 540b Dong: Chung Khoan
• J&J Said to Make Takeover Approach for Drugmaker Actelion

• Financial News
• DBSA Says 1H Profit Declines 27% to 1.04b Rand Y/Y
• Avoid Banks, Even U.S. Ones, as Rally Belies Risks: Berenberg
• Swedish FSA Says Nordea CET1 Ratio Requirement Was 17.3% End 3Q
• Paschi Sets Maximum Conversion Price at EU24.9 as Part of Recap
• Macquarie, ANZ to Pay $11 Million Over Malaysia Rates Probe
• AfDB Names 5 Director-Generals as Part of 10-Year Business Plan
• Woori Bank Sells 4 Tankers From Hanjin Shipping for $58.6m

• Rating News
• BHP’s Outlook Moved to Stable by Moody’s; Ratings Affirmed
• S&PGR Afrms QTMB ‘BBB+/A-2’ Rtgs; Off CreditWatch; Otlk Stable
• S&PGR Affirms Chubb New Zealand ‘AA-’ Rtgs; Outlook Stable

• Other News
• World’s Biggest Pension Fund Gains $21 Billion as Stocks Rally
• Greece’s Biggest Bank Sees Trump Boost to Country’s Economy

ANALYST VIEWS

• The Italian referendum is crucial; should Renzi lose, the subsequent “turmoil” will see the ECB potentially spring into aggressive action several days later...whatever the result the ECB will prolong current QE programmes for at least another 6 months: creditmarketdaily.com

NEW ISSUES

• Arion Bank EU300m 5Y MS +165
• Autostrade Per L’Italia EU600m 2/2027 MS +120
• BNP Paribas EU500m 6/2022 Green Bond MS +40
• Iberdrola Finanzas EU750m 3/2024 Green Bonds MS +77
• ITV EU500m 7Y MS +170
• European IG credit pipeline here and HY credit pipeline here

• NOTE: Simon Ballard is a credit strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- With stock down 20% to lows not seen since 2013 in U.S. dollar terms, investors are paying nothing for high-risk but high-potential of AstraZeneca’s immuno-oncology franchise, Liberum says in note.

• Upgrades to buy vs hold, PT 5200p; says successful I-O data, including Mystic trial data due out in 1H, could be worth 1800p/share
• Sees temporary weakness if trial fails but earnings and fundamental value means longer-term upside possible
• Shares up as much as 1%

DATA

• Stock has fallen 8.2% month-to-date vs a 0% fall in the Stoxx 600 Health Care index; is down 8.8% YTD vs a 15.1% fall in the SXDP index
• Of 36 analyst ratings, 21 are buy, 11 hold, 4 sell, with an average PT of 5379.70p, implying ~28% upside

(Bloomberg) -- Japanese govt bond yield curve shifts higher as yen extends decline against the dollar to weakest level since March while Nikkei stock index closes at highest in more than 10 months.

• Click here for weekly change in yield curve and here for market snapshot
• CPI excluding fresh food fell 0.4% y/y in October, marking an eighth straight month of declines
• Bank of Japan Governor Kuroda said Nov. 22 that new interest rate policy is more sustainable and flexible; also said that with the new policy, the central bank can control long-term interest rates
• Foreign investors sold net 1.11t yen ($9.8b) of Japanese bonds in week ended Nov. 18, most since Sept. 23: MOF data
  • Bought net 1.42t yen of money-market securities last week, most in two months
• Nation to sell 2-year notes on Nov. 29 and 10-year bonds on Dec. 1

• WHAT THEY SAY
• Deutsche Securities (Makoto Yamashita, chief Japan interest- rate strategist)
  • Investors who follow indexes may have to buy longer- maturity debt as their benchmarks’ durations become longer at month-end; this exerts some flattening pressure on the yield curve and along with BOJ’s purchases, it will support bonds
  • If current 10-year note trades around 4bps before auction on Dec. 1, yields at the sale could fetch 4.5-5.0bps, which should attract some demand
  • Market participants see a possible fixed-rate bond purchase from BOJ if 10-year yields rise above 5bps

• Okasan Securities (Makoto Suzuki, senior bond strategist)
  • JGBs will probably remain under slight downward pressure next week
  • BOJ is unlikely to reduce bond buying this year as that may pressure the central bank to conduct fixed-rate operation
  • Expects 10-year yield to fluctuate between zero percent and 0.07% next week

--GO ONOMITSU

(Bloomberg) -- USD/JPY rally stalls just below 114.00 even as U.S. Treasury 5-year yields rise to levels last seen in 2011. USD/TRY climbs to fresh record high as yesterday’s rate hike is seen as insufficient.

• USD/JPY +0.03% at 113.36, vs 113.19-113.90 range
  • FX pair supported on larger-than-usual Gotobi fixing flows as importers buy dollars, say traders
  • Topix Index rises 0.1%, paring earlier gain of as much as 0.9%
• AUD/USD +0.36% at 0.7435, vs 0.7401-0.7440 range
  • Aussie dollar strengthens amid commodity gains, with China iron-ore futures approaching highest close since August 2014
• EUR/USD +0.16% at 1.0571, vs 1.0539-1.0578 range
  • Heavily defended by option-related accounts above 1.0500 level, say traders
• Brent crude oil futures slip 0.9% to $48.54/bbl; Treasury 10-year yield up 4bps at 2.39%
• Click here to monitor statistically significant cross-asset market moves on developed markets

(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

DOWNGRADES

• Rahee Infratech
  • Long-term bank facilities cut to D from B- at Crisil
  • Cites instances of devolvement of letter of credit

UPGRADES

• Adarsha Automotives
  • Fund-based limits raised to BB from BB- at ICRA
  • Cites significant increase in operating income

• GMR Hyderabad International
  • Term loans raised to AA- from A+ at ICRA
  • Cites healthy growth in passenger traffic

• Kapu Gems
  • LT bank facilities raised to A from A- at Crisil
  • Cites efficient working capital management, adequate liquidity

• SE Forge
  • LT bank facilities raised to BBB from BBB- at Care
  • Cites continuous improvement in operational, financial performance

(Bloomberg) -- USD/MYR is little changed after closing on a 14-month high yesterday, with the dollar showing minor gains against most emerging market Asian currencies.

• USD/MYR trades at 4.4615 per dollar
  • Approached key 4.4800 level yesterday
  • Resistance: 4.4800, Sept. 29, 2015 high; 4.6100, Jan. 26, 1998 high; 4.8850, record high in 1998
  • Support: 4.3876, 10-DMA; 4.2914, 21-DMA; 4.2001, 55-DMA
• October CPI, due at 12:00 local time, probably rose 1.5%, unchanged from September, according to median estimate in Bloomberg survey
• USD/MYR 1-mo NDF steady at 4.4975
• Yield on 10-year govt bond closed yesterday up 5bps to 4.36%
• Five-year credit-protection costs for Malaysia rose yesterday by 3.5bps to 169bps, according to CMA New York data

(Bloomberg) -- Daily levels for GBP and Asian currency pairs:

• USD/JPY -- Momentum studies at extreme levels; chart here
• 3rd resistance: 114.87, Feb. 16 high
• 2nd resistance: 114.45, March 10 high
• 1st resistance: 113.69, March 28 high
• Spot: 113.24; pivot point: 113.08
• 1st support: 112.21, 5-DMA
• 2nd support: 110.88, 10-DMA
• 3rd support: 106.41, 200-DMA

• GBP/USD -- Capped below 55-DMA
• 3rd resistance: 1.2771, Oct. 5 high
• 2nd resistance: 1.2674, Nov. 11 high
• 1st resistance: 1.2570, 55-DMA
• Spot: 1.2452; pivot point: 1.2449
• 1st support: 1.2414, 21-DMA
• 2nd support: 1.2221, Nov. 2 low
• 3rd support: 1.2090, Oct. 11 low

• AUD/USD -- Consolidating below 10-DMA
• 3rd resistance: 0.7546, 21-DMA
• 2nd resistance: 0.7521, 200-DMA
• 1st resistance: 0.7431, 10-DMA
• Spot: 0.7411; pivot point: 0.7397
• 1st support: 0.7306, June 24 low
• 2nd support: 0.7286, June 16 low
• 3rd support: 0.7202, June 2 low

• NZD/USD -- Consolidating around 200-DMA
• 3rd resistance: 0.7192, 55-DMA
• 2nd resistance: 0.7156, 21-DMA
• 1st resistance: 0.7047, 10-DMA
• Spot: 0.7006; pivot point: 0.6995
• 1st support: 0.6957, July 25 low
• 2nd support: 0.6952, July 21 low
• 3rd support: 0.6801, June 3 low

• USD/SGD -- Consolidating below 2016 high
• 3rd resistance: 1.4527, 7-year high
• 2nd resistance: 1.4500, psychological level
• 1st resistance: 1.4444, Jan. 11 and YTD high
• Spot: 1.4321; pivot point: 1.4326
• 1st support: 1.4235, 10-DMA
• 2nd support: 1.4075, 21-DMA
• 3rd support: 1.3851, Nov. 9 low

• USD/KRW -- Pivoting around November high
• 3rd resistance: 1,217.15, March 9 high
• 2nd resistance: 1,198.05, May 31 high
• 1st resistance: 1,188.50, June 27 high
• Spot: 1,180.30 (close on Nov. 24); pivot point: 1,181.32
• 1st support: 1,175.40, 10-DMA
• 2nd support: 1,158.84, 21-DMA
• 3rd support: 1,131.84, 55-DMA

• USD/MYR -- Approaching 2015 high
• 3rd resistance: 4.8850, record high in 1998
• 2nd resistance: 4.6100, Jan. 26, 1998 high
• 1st resistance: 4.4800, Sept. 29, 2015 high
• Spot: 4.4602 (close on Nov. 24); pivot point: 4.4557
• 1st support: 4.3876, 10-DMA
• 2nd support: 4.2914, 21-DMA
• 3rd support: 4.2001, 55-DMA

• NOTE: Mark Cranfield is an FX strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.