Halister News

(Bloomberg) -- In EUR rates, 2y and 10y+ maturities are exposed to a bearish repricing relative to the belly, while the opposite is true in USD rates, Societe Generale strategist Adam Kurpiel writes in client note.

• Receive EUR 2s5s30s vs pay USD 2s5s30s; target -70bp, stop -32bp
• EUR short rates have still some room to move up as ECB rate cut expectations are re-priced down
• ECB will announce tweaks to PSPP rules, which should favor a steepening of the 5-30y segment
• Belly of the EUR curve remains supported by the ECB’s forward guidance on rates and TLTROs II
• Potential for an upward Fed re-pricing exposes the USD belly vs the wings

(Bloomberg) -- There may be another lull in EUR credit market proceedings today as some market participants respect the Yom Kippur holiday, but the overarching supportive tone to credit spreads should persist. Concerns are still evident though -- Brexit/GBP volatility, Deutsche Bank capital uncertainty, U.S. political fragility -- all of which may encourage investors to maintain a selective, bottom-up approach to risk assets, Bloomberg strategist Simon Ballard writes.

• Asia credit markets weak overnight on FOMC speculation; highlights the ongoing susceptibility of risk assets to global rates outlook
• Alcoa earnings late yesterday missed estimates; investor focus to turn to fundamentals with any implied weakness likely to dent Fed rate hike expectations
  • Samsung “fireside chat” saga also damping market sentiment as financial cost estimates rise
• GBP rebound may help buoy sentiment today, although downside risks to currency remain elevated

• Risk Appetite Model volatility declines but spread dispersion highlights ongoing caution
• Bloomberg Barclays Eur-Agg Corporate index closed flat yday at 113bps; Bloomberg Barclays Eur HY index closed at 401bps (-1bp)
• CDX IG closed +0.6bps at 74.96 in overnight session; iTraxx Asia Ex Japan IG currently +1.0bps at 116.16 and iTraxx Australia quoted +0.7bps at 103.67

NEWS

• Corporate News
• Alcoa 3Q Adj. EPS, Rev. Miss Ests; Drops -6.4% Pre-Mkt
• Ericsson Says 3Q Results Significantly Lower Than Company Est.
• Vitol First-Half Profit Said Down 42% as Oil-Trading Boom Ends
• Lawson 1H Profits Slightly Above Targets; Maintains Outlook
• Domino’s Pizza Sees FY Results In Line With Market Ests.
• Telford 1H Profit in Line With Views, on Track to Deliver Growth
• Denka Drops After 1H Profit Miss, Full-Year Forecast Cut
• Toyota Seeks Suzuki Partnership as Japan Carmakers Team Up
• Sprint Seeks to Raise $3.5 Billion From Spectrum, WSJ Says

• Financial News
• Deutsche Bank Said to Increase Size of Private Bond Raising
• UBS Said to Poach Deutsche Bank’s Top Asia Private Bankers
• Saudi Fransi Third-Quarter Profit Drops 1% as Expenses Climb
• Bank Victoria Gains Most in Nearly 6 Mos. After Jump in Earnings

• Credit Rating News
• Australian Economy Shows Resilience to Commodity Drops: Moody’s
• Danske LT Deposit Rating Upgraded at Moody’s; Positive Otlk
• S&PGR Places Rtgs On NN Life Insurance On CreditWatch Negative

• Other News
• May Backs Down on Parliament Vote Over Her Brexit Terms
• Trump’s Attacks on GOP Leaders Ignite Civil War Inside Party
• Investigators Said to Suspect New Flaw in Samsung Note 7

ANALYST VIEWS

• Alcoa report suggests we’re in for another weak quarter on the earnings front from corporate America, which might add some volatility into equities over the next few weeks: creditmarketdaily.com

NEW ISSUES

• Affordable Housing GBP124.5m 2.893% 2043 Tap UKT +36
• Chorus EU500m 7Y MS +110
• CRH Finance DAC EU600m 12Y MS +80
• easyJet EU500m 7Y MS +125
• ESM EU3b 6Y MS -22, EU1b 1.125% 5/2032 Tap MS -13
• KBC Group EU750m 7Y MS +65
• SANEF EU300m 12Y MS +48
• SFIL EU1b 8Y Interp. FRTR +21
• Wendel EU300m 6.5Y MS +98
• DNB Bank $750m PNC5.5 AT1 Notes 6.5%
• 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.

(Bloomberg) -- Australia’s first 30-year bond sale was a success both for the government and investors alike, Andrew Ticehurst, rate strategist at Nomura Sydney, says in an interview

• Large deal size of low duration for the market to absorb, yet solid supply is being met by strong demand: Ticehurst
• Wide range of bidding investors including central banks, hedge funds and real money accounts out of Japan: Ticehurst
• Australia 10/20 year bond curve has flattened since but is still steeper than U.S. curve
• Today’s bond issue offers diversification for investors and 3.27% outright yield is still very attractive: Ticehurst
• “If this sort of borrowing could be directed to infrastructure for job growth and productivity rather than current expenditure it would be an even better outcome,” says Ticehurst
• NOTE: AUD 10-yr yield erasing decline since Brexit vote

(Bloomberg) -- Tightening CNH liquidity is triggered by intensifying yuan depreciation expectations in medium-to-long term, DBS treasury and markets managing director Tommy Ong says.

• NOTE: One-week CNH Hibor rate rises most in a month to 6.76103%
• Uncertainty of GBP and EUR adds pressure to yuan; PBOC could intervene in offshore market upon black swan events; volatility of CNH Hibor could increase in the future
• Offshore liquidity has been dropping for months as leveraged carry trades are leaving the market; expects no further sharp fall for CNH
• Fed hike cycle likely gradual; see yuan at 6.72 vs USD by year-end
• NOTE: Yuan deposit in Hong Kong has shrunk 23.3% this year as of end-Aug. to 652.9b yuan, according to HKMA

(Bloomberg) -- Yield rises 6 bps to 2.305%, extending Wednesday’s gains and erasing all losses since the Brexit vote in late June.

• Selloff in 10-year note comes as Australia’s first auction of 30-year bonds raises a record A$7.6b
• 10-year yield also breaks above 200-DMA for first time since April, putting in play a potential test of the downtrend in yields since 2013; see chart