Halister News

(Bloomberg) -- HKD 2-year interest-rate swaps rise 4 bps to 0.9900%, highest since June 8; HKD 5-year interest-rate swaps up 6 bps to 1.3000%, highest since June 20.

• Spread between 2-year and 10-year swaps widens to 64 bps vs 60 bps yesterday; click here for chart
• Spot USD/HKD steady at 7.7589

(Bloomberg) -- Resume sidelined tactical overweight recommendation for Italy vs Spain based on relative valuations as well as recent and upcoming rating, political and bond supply events, Commerzbank strategist David Schnautz writes in client note.

• Long BTP June 2026 vs SPGB April 2026 in ASW; target 18bp, stop -40bp
• 10y area the sweet spot on the curves to express view for a consolidation of Spain’s outperformance based on scheduled auctions, with no 10y BTPs supply until October 28 and potential syndicated deal from Spain
• New 50y BTP also out of the way, and sense timing and valuation render overweight positions in Italy vs Spain much more attractive from a risk-reward perspective

(Bloomberg) -- Sterling remains weak and uncertainty still surrounds Deutsche Bank, but EUR credit spreads continue to benefit from robust underlying demand dynamics and support from the ECB’s CSPP. Primary mkt activity highlights structural bid for risk, with liquidity now expected to pick up post the Columbus Day holiday, Bloomberg strategist Simon Ballard writes.

• Samsung in the headlines overnight as Note 7 model sales stopped, sending Korean equity mkts and the won lower
  • Meanwhile oil price strength fanning inflation expectations and creating fillip for the dollar
• Focus also on U.S. politics post House Speaker Ryan backing away from Trump; uncertainty over coming weeks could intensify, dent investor sentiment for U.S. risk

• Risk Appetite Model steady while recent concerns are digested
• Bloomberg Barclays Eur-Agg Corporate index closed yday at 113bps (flat); Bloomberg Barclays Eur HY index closed at 402bps (-3bps)
• CDX IG closed -0.4bps at 74.37 in overnight session; iTraxx Asia Ex Japan IG currently +4.4bps at 114.37 and iTraxx Australia quoted -0.2bps at 102.91

NEWS

• Corporate News
• Samsung Scrambles for Answers After Halting Note 7 Phone Sales
• Fiat Chrysler Avoids Canada Strike With C$400 Million Deal
• Formosa Chemicals 3Q Net Income NT$14.9b; Est. NT$10b
• Toyota China Sept. Vehicle Sales Rise 12.4% Y/y to 104,200 Units
• Nissan China Sept. Vehicle Sales Rise 26.3% Y/y to 123,600 Units

• Financial News
• Riyad Bank Third-Quarter Profit Drops 19%; Misses Estimates
• Citigroup Hires Kato From Morgan Stanley as Japan Equity Co- Head
• VTB Bank Plans Moving Europe HQ From London After Brexit
• Santander, BCP, Partners Said to Plan Unibanco Sale

• Credit Rating News
• S&PGR Report: Is China’s Debt Growth Sustainable?
• Fitch Assigns WH Group First-Time ’BBB+’ Rating; Outlook Stable
• Fitch Affirms Heartland Bank at ’BBB’; Outlook Stable
• Sydney Water Outlook Revised to Stable From Negative at Moody’s
• Singapore Banks Well-Placed for Asia’s Oil & Gas Defaults: Fitch

• Other News
• Fed’s Refrain From Rate Hikes ‘May Well Be Changing Soon’: Evans
• Russians and Saudis Pledge Joint Effort to Limit Oil Production
• Samsung’s Mounting Crisis Is Opportunity for Apple, Google
• Goldman Warns China’s Outflows May Be Worse Than They Look

ANALYST VIEWS

• The ECB is showing its intentions... and it might just start to have a more definitive and lasting impact on spread direction. Selling bonds means kissing them goodbye forever should they find their way into the ECB’s coffers: creditmarketdaily.com

NEW ISSUES

• EIB EU500m 0.875% 9/2047 ECoop MS +6
• Ibercaja Banco EU500m 7Y Covered Bond MS +22
• Snam EU1.25b 10Y MS +50
• Telefonica Emisiones EU1.25b 4Y, EU750m 15Y Bonds
• TenneT EU500m 17Y Green Bond MS +50
• VVO Group EU200m 7Y Snr Sec Notes MS +160
• 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) -- Falcon Private Bank Ltd. would have licence withdrawn in the event of further breach, FINMA says in statement, saying bank breached money laundering regulations in transactions associated with Malaysia’s 1MDB.

• FINMA has launched enforcement proceedings against two of the bank’s former executives
• In the period under investigation between 2012 and the summer of 2015, assets amounting to approximately $3.8 billion were transferred to accounts at Falcon and associated with the 1MDB Group. These funds were generally moved on quickly: FINMA
• Falcon had a number of business relationships with domiciliary companies within the 1MDB Group and executed transactions amounting to approximately $2.5 billion via the accounts of two of these offshore companies: FINMA
• Falcon did not sufficiently query or assess the plausibility of the proffered documents and information about the supposed financing of energy projects, nor did it question the commercial background of the $1.3 billion which was immediately transferred from one account to another
• Falcon had a client relationship with a young Malaysian businessman with links to individuals in Malaysian government circles: FINMA
• Falcon did not verify how this individual had been able to acquire assets of $135 million in an extremely short period of time or why a total of $1.2 billion was transferred to his accounts at a later date: FINMA
• Falcon failed to adequately investigate the commercial background to pass-through transactions amounting to $681 million and the repayment six months later of $620 million via these accounts despite conflicting evidence: FINMA
• FINMA: an internal Falcon e-mail states: “We started this six months ago and now we have to go through with it – somehow”
• FINMA: Internal warnings from bank employees querying transactions, relationship with the Malaysian businessman were not followed up satisfactorily
• Falcon’s decision-makers were aware of these internal concerns, yet decided to carry out transactions: FINMA
• One senior manager warned the Singapore branch carrying out the transactions: “Head Office is watching you”: FINMA
• Two representatives of the bank’s owners who were on the board of directors initiated business relationships with the 1MDB Group and with individuals from their immediate circle: FINMA
• Both board members pursued their own illegitimate purposes; neither of them remains on the bank’s board of directors
• FINMA has no evidence that other members of Falcon’s board were implicated in these matters or that this behavior was widespread at the bank
• FINMA CEO Mark Branson: “The issues surrounding 1MDB form one of the largest cases of suspected corruption in recent times. The global financial system has been blatantly misused’’
• NOTE: Falcon Confident About Future After MAS, FINMA Probes on 1MDB NSN OEV0YB6TTDS4

Story Link:NSN OEV0ER6JIJUT

(Bloomberg) -- U.S. Treasury yields face upward pressure amid global bear steepening trend as some investors consider limitations to expansion of BOJ and ECB monetary policy, says Hiroshi Yoshida, senior portfolio manager at MassMutual Life Insurance.

• Medium-term and long-term investors may unwind long positions on U.S. Treasuries amid global bear steepening trend, says Tokyo-based Yoshida by phone
• Surging crude oil prices also lift U.S. yields and U.S. break-even inflation rates
• Market participants may hesitate to buy bonds until 10- year yield nears 1.95%-2.00% area
• U.S. presidential election also weighs on U.S. sovereign bonds market
  • Trump risk suggests yield surge on his stance toward tax reduction and fiscal spending
• U.S. 10-year yield up 5 bps to 1.766%

(Bloomberg) -- Swiss Financial Market Supervisory Authority says Falcon Private Bank Ltd. seriously breached money laundering regulations by failing to carry out adequate background checks into transactions and business relationships associated with Malaysia’s 1MDB, according to statement on website.

• "FINMA has ordered the disgorgement of illegally generated profits amounting to CHF 2.5 million and banned the bank from entering into business relationships with foreign politically exposed persons for a period of three years": statement