Halister News

Economic Release Details: {CLGDPNA% Index ECOD} --PHILIP SANDERS

(Bloomberg) -- Cash corporate bonds are set to end the week softer as bond market weakness persists and after Janet Yellen fueled near-term Fed rate rise speculation with her JEC testimony, Bloomberg strategist Simon Ballard writes.

• Rising sovereign bond yields driving an unwind of risk appetite, even if equities buoyed by economic growth optimism
  • Market will be looking for any hints on ECB policy outlook when president Draghi addresses European Banking Congress later
• Geopolitics to also remain critical element in investor sentiment/risk appetite over coming weeks as president-elect Trump builds his team and U.K. Brexit negotiations highlight challenges ahead

• Bloomberg Barclays Eur-Agg Corporate index closed Thursday at 120bps (+2bps); Bloomberg Barclays Eur HY index closed at 414bps (+3bps)
• CDX IG closed Thursday -0.5bps at 74.78; iTraxx Asia Ex Japan IG is currently +1.9bps at 128.18 and iTraxx Australia quoted +1.3bps at 112.00

NEWS

• Corporate News
• VW Said to Cut 23,000 Jobs, Save $3.9 Billion in Labor Pact
• Ford Cuts Profit Outlook Amid Glut With Dawn of Trump Era
• Fuller Smith 1H Revenue up 11%; Trading As Expected Since Period
• AOL Said to Cut 500 Workers to Narrow Focus on Mobile, Video

• Financial News
• Bank Bosses Soften Tone on Brexit as May Extends Olive Branch
• Greece’s National Bank Begins Sale of Bulgarian Unit
• Spanish Banks to Face Negative Impact of Higher Bond Yields: KBW

• Rating News
• S&PGR Revises Telstra Outlook To Negative; ‘A/A-1’ Rtgs Affrmd
• Fitch Maintains Bluestar’s ‘BBB+’ Rating on Watch Positive
• South Africa Junk Rating Seen Inevitable, This Year or Next

• Other News
• Global Bonds Poised for Biggest Two-Week Loss in Quarter Century
• Emerging-Market Assets Retreat After Yellen Backs Rate-Rise Case
• Japan Megabank Default Risk Drops Amid Trumpflation Hopes
• Brexit Could Boost EU’s Capital Market, ECB’s Angeloni Says
• Yellen Signals Fed Won’t Be Cowed After Trump’s Election Victory

ANALYST VIEWS

• There is a persistent air of uncertainty now, but (primary) deals have been getting done... We think that this is a lost opportunity for borrowers. There is still demand for corporate bonds: creditmarketdaily.com
• A continued rise in global yields towards more normal levels would change long term investment cases. While HY should continue to exhibit lower sensitivity to fluctuations in rates than IG peers, they should suffer much more from an end of the ‘hunt for yield’: Commerzbank

NEW ISSUES

• KfW GBP150m 2% 12/2018 Tap UKT +24
• PRS Finance GBP265m 10Y Senior Secured UKT +46
• State of Schleswig-Holstein EU300m 0% 7/2018 Tap MS -22
• Vivendi EU600m 7Y MS +80
• 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) -- Bank of Japan offered to buy bonds at fixed yields this week for first time since the method was introduced in September, spurring speculation that a further increase in 10-year yields could trigger another such operation.

• Click here for weekly change in yield curve and here for market snapshot
• Benchmark 10-year yield rose to 0.040% on Friday, highest in nine months; BOJ aims to keep the yield around zero percent
  • A rise in 10-year yield to 0.050% may trigger another fixed-rate operation, according to Mitsubishi UFJ Trust & Banking
• BOJ’s offer to buy current 2-year JGBs at -0.090% and 5-year JGBs at -0.040% on Thursday drew no bids
• Governor Kuroda said Friday that the central bank can buy unlimited amount in fixed-rate operations if needed and will continue to use the method as necessary; also says increase in bond yields at too rapid pace not appropriate
• Finance ministry will auction 40-year bonds on Nov. 25
  • The 20-year bond sale on Thursday marked the lowest bid- to-cover ratio in eight months

• WHAT THEY SAY
• PineBridge Investments Japan (Tadashi Matsukawa, head of fixed-income investment)
  • There’s concern about 40-year bond auction following weak results in 20-year debt sale
  • Close attention is now paid to whether BOJ will conduct fixed-rate operation for the 10-year sector

• Okasan Securities (Makoto Suzuki, senior bond strategist)
  • A fixed-rate operation is likely if yields continue to rise further
  • While demand from life insurance companies and pension funds are expected at 40-year bond offering, outcome could be weak

(Bloomberg) -- In VW cost-cutting plan to be unveiled Friday, job cuts will come through attrition, according to people familiar with the matter.

• Co. will rule out forced layoffs until 2025, the people say
• Cost-cutting plan will comprise about 3 billion euros in savings from German factories, plus about 700 million euros from plants abroad, to reach a 4% operating profit margin in 2020, the people say
• Co. reached agreement with workers late Wednesday for the VW brand, with further details for savings across the co. ironed out Thursday, the people say
• VW will add as many as 9,000 employees for new projects such as electric cars, digital features, the people say
• NOTE: VW Said to Target $4 Billion in Cost Cuts at Namesake Brand

--PHIL SERAFINO

(Bloomberg) -- LafargeHolcim lowers 2018 adj. operating Ebitda target to EU7b from “at least CHF8b” (Nov. 2015), says target includes CHF200m additional cost savings.

• Says targets adjusted to reflect scope of group, FX rates
• Now expects cumulated operating FCF of CHF7.5b; maintains commitment to 2018 run rate capex of less than CHF2b, ROIC improvement of 300bps in 2018 vs 2015 level
• Proposes CHF2/share dividend, sees up to CHF1b share buybacks over next 2 years
• Comments in CMD statement

Link to Statement:Link

(Bloomberg) -- Goldman’s top trade recommendations for 2017 include bets on a stronger dollar, faster U.S. inflation in the U.S., a weaker yuan and carry trade opportunities in certain emerging markets, according to Nov. 17 note.

• First trade recommendation:
• Go long USD vs equally weighted EUR and GBP, with a basket indexed to 100; target 110 and a stop at 95
  • Cites USD positive factors, including rising likelihood of fiscal stimulus, more protectionism and immigration controls
  • Ongoing uncertainty over Brexit process will weigh on GBP, while slew of elections, including Italian political fallout after constitutional referendum, and elections in France, Germany and Netherlands, will weigh on EUR
  • Cuts GBP/USD 6-month forecast to 1.18 from 1.21; 12- months to 1.14 from 1.25

• Second recommendation:
• Long USD/CNY via 12-month non-deliverable forwards for initial target of 7.30 with stop at 6.75
  • Dilemma of China’s currency regime is keeping CFETS basket stable in environment of a rising dollar requires USD/CNY to rise meaningfully; this risks re-escalting capital outflows
  • Goldman cuts yuan forecasts; click here for details

• Third recommendation:
• Long equally-weighted basket of BRL, RUB, INR, ZAR vs short an equally-weighted basket of KRW and SGD; entry level of 100, total return target of 114 and stops at 93
  • Brazil, Russia, India and South Africa’s external balances have strengthened materially, inflation is on a declining trajectory; real carry is generous, prospects of stronger growth
  • Korea exposed to weakening CNY trend; low inflation in Singapore means that SGD expected to trade on weak side of SGD NEER band

• Fourth recommendation:
• Long U.S. 10-year TIPS break-even inflation at an entry level of 1.90%, with initial target of 2.30% and stop at 1.60%; long euro 10-year inflation via swaps at entry level of 1.25%, with target of 1.60% and stop at 1.00%
  • Expansionary U.S. fiscal policies in an economy close to full capacity, will likely push up domestic price and wage inflation
  • Along with a dovish ECB, potential for EUR to depreciate should push up inflation risk premium in EUR inflation swaps

--SHAMIM ADAM

(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

• Shimla Tolls
  • Long-term bank facilities cut to B- from B+ at Crisil
  • Cites delay of about six months in project completion

UPGRADES

• Hotcrete Infrastructure
  • Cash credit raised to BBB from BBB- at ICRA
  • Cites strong growth in revenues

• Partap Industries
  • LT bank facilities raised to BBB+ from BBB- at Care
  • Cites healthy scale-up of operations

• Sunny International
  • LT bank facilities raised to BBB from BBB- at Crisil
  • Expects company to maintain improvement in business, financial risk profiles over the medium term