HALISTER1: Offshore Selling in Asian Bonds May Continue Near Term: HSBC

Offshore Selling in Asian Bonds May Continue Near Term: HSBC

(Bloomberg) -- Offshore selling of Asian bonds may continue as term premium in U.S. Treasury yields rises, HSBC Asia rates strategist Himanshu Malik says.
  • Recommends reducing duration in Asia bonds
  • “The extent of selling by foreign investors is more significant than what was witnessed in the early stages of the taper tantrum in 2013. But it should be noted that yields across Asia did not rise as much this time around.”
  • This is largely because structural reforms in some countries have made them less vulnerable to external factors
  • Opportunity to extend duration in Asia bonds will reappear in 2017; medium term, bond markets such as Indonesia and India should still be net recipients of offshore investment and yields are expected to be biased lower in 2017
  • India bond yields to head lower after scrapping of high- value bank notes and due to being more insular to higher U.S. Treasury yields
  • NOTE: $1.6b worth of funds pulled from Indian bond markets last week; $1.4b pulled from Thailand and $924m from Indonesia
  • Bond traders’ angst seen as term premium turns positive
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Himanshu Malik (HSBC Securities Asia Ltd)

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HALISTER1: INSIDE G-10: Dollar Juggernaut Rumbles on; Treasury Yields Fall

INSIDE G-10: Dollar Juggernaut Rumbles on; Treasury Yields Fall

(Bloomberg) -- Dollar juggernaut continues into Thanksgiving week with USD/JPY breaking above 111.00 even as 10-year Treasury yield fall 2bps to 2.34%. CAD bucks the trend on higher oil prices.
  • Iraq to offer 3 new proposals this week to discuss implementing an OPEC accord to cut output, WSJ cites Iraq oil minister Jabbar
    • USD/CAD drops 0.16% to 1.3483
  • AUD/USD -0.29% to 0.7317 vs 0.7311-0.7347 range
    • Pair partly hit by AUD/NZD selling seen from multiple funds, traders say
    • Goldman adds long Aussie Rates vs U.S.; reduce USD as well as EMFX exposure
  • USD/JPY +0.15% to 111.08 vs 110.65-111.19 range
    • BOJ should consider market functions when setting monetary policy, says new board member Takako Masai; story here
    • BOJ could deliver fixed-rate bond-purchase operation if the 10-year JGB yield approaches 0.05%-0.10% area: SMBC Nikko
  • EUR/USD +0.07% to 1.0595 vs 1.0579-1.0615 range
    • Capped as macro funds offers are layered in 1.0620-1.0640, say traders
    • Clients are positioning for possible Euro-area event risks that may emerge, beyond the Trump-inspired USD strength already occurring, one of the trader says
    • Former PM Fillon is front-runner in France’s 2017 presidential election; story here
  • Click here to monitor statistically significant cross-asset market moves on developed markets
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER1: INDIA RATINGS: Muthoot Fincorp Cut; Dhoot Transmission Raised

INDIA RATINGS: Muthoot Fincorp Cut; Dhoot Transmission 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
DOWNGRADES
  • Muthoot Fincorp
    • Long-term bank facilities cut to A- from A at Crisil; NCDs also cut to A- from A
    • Cites leveraging of balance sheet to acquire real estate properties from a partnership firm owned by Muthoot Pappachan Group
  • Sai Wardha Power
    • LT bank facilities cut to D from BB+ at Care
    • Cites delays in servicing debt obligation
  • Sohrab Spinning Mills
    • LT bank facilities cut to D from B at Crisil
    • Cites instances of delay in servicing term debt
UPGRADES
  • Dhoot Transmission
    • LT bank facilities raised to A- from BBB+ at Care
    • Cites continuous growth in scale of operations
  • Sudarshan Jeans
    • LT bank facilities raised to BBB+ from BBB- at Care
    • Cites healthy scale-up of operations
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
8232702Z IN (Muthoot Fincorp Ltd)
9770321Z IN (Dhoot Transmission Pvt Ltd)
0991195D IN (Sohrab Spinning Mills Ltd)

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HALISTER1: JGB 10-Year Rate Near 0.10% May Spur Fixed-Rate Buys: SMBC Nikko

JGB 10-Year Rate Near 0.10% May Spur Fixed-Rate Buys: SMBC Nikko

(Bloomberg) -- BOJ could deliver fixed-rate bond-purchase operation if the 10-year JGB yield approaches 0.05%-0.10% area, according to SMBC Nikko Securities.
  • Hurdle of conducting fixed-rate operation seems lower than investors previously thought, making it hard to sell 10-year notes from current level, Souichi Takeyama, a rates strategist in Tokyo, says
  • Mid-term zone of the curve is steady after BOJ conducted first fixed-rate bond-buying operation last week
  • Yields on super-long notes advance as this is the zone where investors don’t expect fixed-rate operation anytime soon
  • There was buying interest in JGBs earlier this morning on speculation the BOJ will increase amount of bond purchases or conduct fixed-rate operation
    • But yields rose after normal size of operation; trading volume was thin, which makes direction from here uncertain
  • Yield on 10-year securities steady at 0.030% while that on 30-year debt rises 2.5bps to 0.615%, highest since March
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Souichi Takeyama (SMBC Nikko Securities Inc)

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HALISTER1: Risks for Steeper U.S. Treasury Curve Offers Opportunity: UBS

Risks for Steeper U.S. Treasury Curve Offers Opportunity: UBS

(Bloomberg) -- UBS suggests three Australian interest rate trades for 2017 centered around unhedged Aussie bonds, buying compression at long end and curve flatteners, according to a note.
  • Sees 10y AU-US spread bottoming at 30bp with risks tilted to downside
    • Views this level as ’fair’; however, concedes that nominal growth and base rate differentials allow for a tighter spread
  • Recommends to buy Aussie bonds with unhedged FX
    • AUD can strengthen modestly in 2017 despite tighter cross-market yield spreads; terms of trade justify a stronger currency
    • Risk-reward for currency-unhedged Aussie bond purchases is most attractive for U.K. and Japanese investors
  • Recommends to buy long-end Aussie vs. US (or vs. US & Germany)
    • Long-end of the Aussie curve has lagged strong performance of the 10y sector post-US election
    • Opens up opportunity to move compression trade further out the curve; trade suits relatively modest reflationary forces
  • Recommends Aussie long-end flatteners vs US
    • Fade divergence in curve movements between AUD and US curves
    • Suggests 7- and 20-yr part of curve as way to capitalize on prospects of increased US stimulus and increased supply between ACGBs and USTs post the US election
  • Sees 10y US treasury yields ending 2017 at 2.25%, before rising modestly to 2.50% at end-2018
    • Upside risks have clearly increased post US election with potential for steeper Treasury curve
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER1: Goldman Adds Long Aussie Rates vs U.S.; Reduce USD, EMFX Holding

Goldman Adds Long Aussie Rates vs U.S.; Reduce USD, EMFX Holding

(Bloomberg) -- Goldman Sachs Asset Management added to its long Australian rates versus short U.S. position, maintain positions in U.S. TIPS and reduced exposure to both USD and emerging mkt currencies, according to note dated November 18.
  • Weakness in Australian rates amid the global sell-off is excessive
    • Stabilization in China and a rebound in commodity prices reduce likelihood of a near-term cut
    • Expects RBA to maintain an easing bias given compositional weakness of jobs growth and financial stability risks posed by the housing market
  • Maintain long U.S. TIPs in light of Trump’s fiscal, tax and trade policies, all of which are seen inflationary
    • Anti-global rhetoric driving trade and immigration policies may add inflationary pressures further out
  • Reduced exposure to both USD and EMFX, pending more clarity on Trump’s policy priorities; his victory and control of Congress has widened spectrum of possible outcomes in developed and EM mkts
    • Potential USD positive catalysts include increased spending, tax cuts, repatriation of overseas corporate profits and geopolitical concenrs
    • Within EMFX, reduce longs in MYR, increased shorts in KRW, SGD and TWD
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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