Halister News

(Bloomberg) -- Appetite is strengthening for inflation-linked bonds as downside risks to inflation diminish; U.S. and euro-area breakevens should widen further, HSBC strategist Theo Chapsalis writes in client note.

• Favor Italian breakevens as the ECB’s policies are likely to drive a convergence between BTPei and OATei breakevens
  • However, breakeven curves will not steepen to last year’s levels due to likely re-openings of OATei47 and Bundei46 along with the possibility of a new 30-year BTPei
• Opportune moment to initiate beta-weighted shorts on 30-year sector of the U.K. curve ahead of the November syndication
  • Long-end has witnessed a very strong performance so far and valuations begin to look stretched
  • Still value in front-end RPI swap forwards
• Remarkable that the entire U.S. breakeven curve trades at levels below core CPI at a time when energy-related base effects are turning positive

Economic Release Details: {RREFKANN Index ECOD} --SCOTT ROSE

(Bloomberg) -- While the outcome of the Italian referendum over constitutional reform on Dec. 4 remains too close to call, risks of extreme political instability are likely overstated, JPMorgan economist Marco Protopapa writes in a note.

• Even in the event of a ‘No’ outcome, he sees continuity of Renzi’s premiership as the most likely scenario under the current polls
• A lead below 2% for ‘No’ in most recent polls is not sufficient to conclude that a ‘No’ outcome is much more likely, with a ‘Yes’ outcome within the realm of possibility
• Most likely scenario is a victory of ‘No’ by a small margin
  • Renzi likely to offer his resignation to the president of the Republic, who would refuse the resignation and invite Renzi to verify that he has the support of a majority in the parliament
  • A reshuffle of some cabinet positions could be in order

--PHIL SERAFINO

Economic Release Details: {EUESEMU Index ECOD} --ZOE SCHNEEWEISS