Halister News

(Bloomberg) -- Deutsche Bank, back in the spotlight amid ongoing attempts to improve its capital buffers and investor confidence, may weigh on risk-asset sentiment Wednesday along with corporate earnings and macro outlook concerns, Bloomberg strategist Simon Ballard writes.

• Still, cash corporate bonds remain resilient, underpinned by low global rates and central banks’ QE backstop bids
• U.S. election in less than 2 weeks may now be major driver of relative U.S. corporate sector allocation and spread performance
  • Clinton win could prove negative for healthcare, pharmaceutical pricing power; Trump seen as more anti- litigation, pro-business, oil, tobacco

• Risk Appetite Model grinding back toward year-to-date lows
• Bloomberg Barclays Eur-Agg Corporate index closed yesterday at 110bps (flat); Bloomberg Barclays Eur HY index closed at 370bps (+3bp)
• CDX IG closed +0.5bps at 74.32; iTraxx Asia Ex Japan IG is currently -0.3bps at 114.74 and iTraxx Australia quoted +0.3bps at 102.33

NEWS

• Corporate News
• Heineken 3Q Organic Consolidated Beer Volume Beats Estimates
• Airbus 3Q Profit Misses Estimate; FY Forecast Confirmed
• Peugeot 3Q Revenue Misses Estimate; Forecast Confirmed
• Telefonica Deutschland 3Q Revenue Tops, Net Loss Exceeds Ests.
• Bayer 3Q Ebitda Ex-Items Beats Ests.; Raises 2016 Core EPS Goal
• Telenor Posts 3Q Loss of NOK4.8b After Indian License Impairment
• Hyundai Motor 3Q Oper. Profit 1.07t Won; Est. 1.22t won
• Iberdrola 9M Adj. Net EU2.04b; Est. EU2b
• Canon Cuts Forecasts Below Consensus After 3Q Profit Miss
• Ballard 3Q Adj Loss/Shr 2c, Est. Loss 3c

• Financial News
• Lloyds 3Q Underlying Pretax Misses; Takes GBP1b PPI Charge
• Storebrand 3Q Profit Beats; Solvency Margin Drops Vs 2Q
• Santander 3Q Net Beats Estimate; CET1 Fully Loaded 10.47%
• Metro Bank Swings to 3Q Pretax Profit Q/q, Customer Accounts Up
• Nordea Profit Rose 14% Last Quarter as Bank Beat Estimates
• Bankia 3Q Net Beats Estimate; CET1 Fully-Loaded 13.24%
• Morelli Says (BMPS) Seeing Interest From Cornerstone, Anchor Investors

• Rating News
• European Steelmakers’ Outlook Negative on Cheap Imports: Moody’s
• S&PGR Affirms Western Australia ’AA+/A-1+’ Rtgs; Otlk Negative

• Other News
• Gundlach Says TIPS ‘for Winners’ Amid Signs Inflation Reviving
• With Economy Stable, China Steps Up Quest to Rein in Credit Risk
• ‘Tough’ Earnings Season Looming for Australian Banking Giants

ANALYST VIEWS

• Moody’s Sees Rosier Outlook for European Carriers as Prices Rise
• China Hard Landing Risks Recede, Yuan to Float Downward: Fitch
• Finally, the natives will be happy as they were getting a little restless -- especially at the lack of non-financial supply. Draghi will look at it and perhaps feel vindicated that issuance is up because of the ECB’s (CSPP) -- it isn’t: creditmarketdaily.com

NEW ISSUES

• Danone EU6.2b 5-tranche deal; EU1.35b 2Y FRN at 3mE +15, EU1b 4Y bonds at MS +28, EU1b 6Y bonds at MS +40, EU1.25b 8Y bonds at MS +50, EU1.6b 12Y bonds at MS +65
• Banco de Credito Social Cooperativo EU100m 10NC5 Tier 2 notes at 9% (MS +905)
• Banque Federative du Credit Mutuel EU700m 10Y Tier 2 notes MS +155
• DG Hyp EU500m 12/2024 covered bonds at MS -14
• Merlin Properties EU800m 10Y bonds at MS +160
• Sekerbank USD 10NC5 Tier 2 bonds to yield 10%
• Erste Abwicklungsanstalt $1.25b 3Y Reg S bonds at MS +30
• Kommunekredit EU500m 20Y bonds at MS +13
• Nordic Investment Bank GBP250m 5Y bonds at UKT +24
• Republic of Austria EU5b 2-tranche deal; EU3bb 7Y bonds at MS -28, EU2b 70Y bonds at RAGB 2047 +53
• United Kingdom tapped UKT 2.50% 7/2065 by GBP4b at UKT 3.50% 2068 flat
• United Mexican States EU1.90b 2-part transaction; EU1.2b 1/2025 bonds at MS +125, MEX 3.375% 2/2031 EU700m Tap at 2.20%
• European IG credit pipeline here and HY credit pipeline here
• Issuers exposed to S-T rollover and interest-rate reset risk 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.

--VERONICA EK

(Bloomberg) -- Today’s range of 3Q inflation readings could leave RBA with an option of shifting toward a more neutral bias, writes Bloomberg strategist Michael G. Wilson.

• OIS pricing for a November cut tumbled to 6% on Wednesday from 15% the day prior; yield on sovereign 3-year notes rose 2 bps to 1.74% while 10-year slipped 1 bp to 2.27%
• NOTE: 3-year bond futures may be capped by 200-DMA, Bloomberg analysis suggests
• As the gap between headline inflation and trimmed mean narrows, it will encourage the RBA to leave monetary policy untouched; see chart
  • The task of weakening the AUD may be left to a Fed hike in December, which if it eventuates, may stimulate tradables inflation
• Any further easing in the policy rate should be preceded by a cut to the RBA’s inflation expectations. Against a backdrop of rising commodity prices, such a revision may be unlikely
• The 19.5% rise in fruit prices on reduced supply caused by weather events is seen as temporary; without it tradables inflation would have been softer
  • Increases in regulated fees, charges for tobacco, property rates, charges and a new motorist injury scheme in WA all seen as one time
• Market-based inflation excluding volatile items increased by 1.2% through the year to 3Q, remaining at a four-year low; that should help further dampen inflationary expectations

(Bloomberg) -- India’s banking system cash deficit of around 500b rupees ($7.5b) from a surplus of over 1t rupee is a primary cause for the stall in bond rally, Harihar Krishnamoorthy, treasurer at FirstRand says.

• “The market was also expecting more front-loaded OMO purchases by the RBI which hasn’t happened yet,” says Krishnamoorthy
• NOTE: RBI bought 100b rupees of bonds yesterday, its first such purchase since early Sept.; bids tendered amounted to 516.6b rupees, five times the scheduled amount
• Low cutoff prices and the high amount tendered at OMO reflect the negative sentiment: FirstRand
• Foreigners have not been buying India bonds at lower yields
• NOTE: Foreign funds have been net sellers of rupee debt in Oct. to tune of 54.2b rupees so far
• Yield on 10-year bond at 6.77%, levels seen before RBI’s rate cut on Oct. 4

--MARTIJN VAN DER STARRE

--MICHAEL MOORE

(Bloomberg) -- Declining Japanese inflation is unlikely to lift USD/JPY near term as further BOJ easing looks remote for now while implied vols and market positions suggest more rangebound days ahead, Bloomberg strategist David Finnerty writes.

• September CPI is forecast to fall 0.5% y/y, according to median est. of economists in Bloomberg survey
  • CPI ex-food, energy expected to rise 0.1% y/y from 0.2% y/y in Aug.; data due Oct. 28 at 8:30am local time
• USD/JPY has traded predominantly within 100.00-105.00 range since early August
  • 1-mo. implied volatility remains just above a 7-month low and is currently forecasting 72% probability it will remain within 101.27-107.13 range over next month; spot currently at 104.30
  • Leveraged funds net long JPY position has been cut from 64,179 contracts in week ended Sept. 27 to 24,321 in the three weeks to Oct. 18 as funds switch to a more neutral stance on the FX pair, indicating reduced speculation USD/JPY will move beyond current range near term
• BOJ tweaked monetary policy in September to include yield curve control; under Governor Kuroda, policy changes have been followed by at least eight months of no further adjustments as the central bank monitored effectiveness of its last measures
• Central bank releases its latest Outlook report at the upcoming meeting and Gov. Kuroda has indicated that BOJ may extend the timeline to reach its 2% inflation goal again
• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- Bayer 3Q sales EU11.3b, est. EU11.3b.

• 3Q Ebitda before special items EU2.68b, est. EU2.53b
• 3Q core EPS from continuing operations EU1.73, est. EU1.65
• Says confidence for full year 2016
• For the Bayer Group, including Covestro, now aims to increase core EPS from continuing operations by a high- single-digit percentage (previously: a mid-to-high-single- digit percentage)
• Investor call at ~2pm CET
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