Halister News

(Bloomberg) -- Despite rally vs dollar in recent weeks, RUB still looks more attractive than most other EM FX, Credit Suisse analyst Kasper Bartholdy says in research note.

• NOTE: RUB is +3.5% vs dollar in last month, best among 24 EM FX tracked by Bloomberg
• RUB offers combination of high real yield, strong current account
• RUB looks “cheaper” than most EM FX on 5-year REER
• RUB has additional support from possibility of moderately positive trend in oil prices in coming weeks
• While Russian XCCY curve is “exceptionally inverted,” Russian bond curve largely flat in swaps
  • CS recommends 19s/28s steepener in OFZ bonds

(Bloomberg) -- Spain to sell 0.75% 07/2021, 1.30% 10/2026, 4.20% 01/2037 for EU3.5b-4.5b, 0.30% I/L 11/2021 for EU0.5b-1b at 10:30am CET.

• Analysts optimistic on the sale given recent sell-off, rich levels on repo; Spain seen as rich vs Italy, after recent outperformance

• BBVA (Jaime Costero)
  • 5Y has traded consistently rich in repo market, specialness has appeared once again over past few trading days
  • 10Y benchmark has remained rich on repo, since it was syndicated, despite been tapped twice in Sept.; cross- market, think outperformance of SPGB 10Y area seems overdone, remain cautious
  • 20y sector has suffered in recent bear steepening in EGB market, following recent QE taper story; bond trades around fair value on fitted curve, though also trades special on repo, which should add appetite in the auction

• ING (Benjamin Schroeder)
  • All bonds trade special in repo, particularly 20y and 5y issues; given QE extension still likely in Dec., 5s10s looks steep again, sitting at top-end of range since beginning of Aug.
  • Cross-market, SPGBs have shown remarkable performance vs BTPs, driven mainly by political divergence, ultra-long supply weighing on Italy
    • Further spread performance potential from current levels is limited

• Mizuho (Antoine Bouvet)
  • Optimistic auction will find support with 10Y yields back around 1% level, now markets have had a chance to put recent reports of QE tapering discussions into perspective
  • Most optimistic for 5Y bond given its expensiveness on repo
  • Expect 20y issue to benefit from short covering demand, though note back-end of the curve has been pressure following 50Y BTP syndication earlier this week

(Bloomberg) -- Geographic differentiation is re-emerging as a key theme across global credit markets. Nascent U.S. economic growth and cautious expectations of Fed tightening are antonymous to EUR credit markets that remain reliant on monetary stimulus, as evidenced by the negative reaction to ECB QE taper talk this week, Bloomberg strategist Simon Ballard writes.

• Outlook for U.S. and EUR monetary policy is dominating investor sentiment this week; mkt cognizant of weak nature of underlying Euro zone macroeconomic fundamentals
  • ECB taper talk lacks credibility and wider bias to credit spreads has lacked conviction
  • U.S. election result remains critical to post Nov 8 outlook for risk assets
• Asian credit firmer overnight on global macro optimism as oil hovers around $50 mark; should help to underpin EUR at open later
• Risk Appetite Model volatility recedes but spread dispersion stays firm
• Bloomberg Barclays Eur-Agg Corporate index closed yday at 114bps (-1bps); Bloomberg Barclays Eur HY index closed at 409bps (-3bps)
• CDX IG closed -0.8bps at 74.60 in overnight session; iTraxx Asia Ex Japan IG currently -0.6bps at 116.0 and iTraxx Australia quoted -1.0bps at 102.67

NEWS

• Corporate News
• EasyJet Suffers First Profit Drop Since 2009 on Terror, Brexit
• BAE Systems Says Trading Consistent With Management Expectations
• DFS FY Adj. Ebitda In Line, Sees Special Capital Return This Yr
• Dunelm 1Q Total LFL Sales Miss Estimates
• BTG Says FY Revenue at Current FX Rates Will Top Expectations
• Estia Now Sees F17 Underlying Earnings Down; Had Forecast Growth

• Financial News
• Deutsche Bank Mismarked 37 Loans Like Monte Paschi’s, Audit Says
• Bank of Queensland profit edges up despite lending slowdown
• IMF Warns of Profit Slump at Indian Banks Amid Surging Bad Loans
• Barclays Private Bankers Said to Defect Before OCBC Takeover
• Credit Suisse to Pay $90 Million Over Asset Disclosures

• Credit Rating News
• Fitch: ASEAN Banks Resilient, But Most Face Negative Trends
• Fitch Affirms NAB’s Mortgage Covered Bonds at ’AAA’/Stable

• Other News
• May Stirs Concern Brexit Comes Before Business for Conservatives
• Fed’s Fischer Says Central Banks Need Fiscal Help to Spur Growth
• Bank Bail-In Advice From First EU Country Ever to Try One Out

ANALYST VIEWS

• Tapering of the ECB’s bond purchase programme anytime soon would be akin to throwing in the towel... We’re hooked on easy money, it’s necessary and we’re likely going to see QE ongoing in some form or other for the medium term: creditmarketdaily.com
• European Banks Upgraded at Citi; Not Priced for Risks Reducing

NEW ISSUES

• Air France-KLM EU400m 6Y 3.75%
• Cariparma EU750m 8Y, EU750m 15Y Covered Bonds
• EIB EU500m 0.25% 9/2029 MS -25
• EIB GBP500m 2.5% 10/2022 Tap UKT +40
• KfW EU1b 1.25% 7/2036 Tap MS -18
• Saxony-Anhalt $750m 3Y Reg S MS +26
• Terna EU750m 12Y MS +57
• Alliance Automotive EU180m 6.25% ’21 Tap 105.5/106
• Argentina EU1.25b 1/2022, EU1.25b 1/2027 Bonds
• 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) -- As Fed, ECB and BOJ remain dovish, front-end CNH sovereign and high-grade bonds should outperform on search for yield as global rates stay low, HSBC analysts Ding Shiwen and Zhang Zhiming write in note today.

• These bonds underperformed in Sept. because of rate volatility
• Funding squeeze showed CNH pool is still too shallow to stand surge in demand; SDR inclusion is major step forward and will increase demand for CNH govt bonds, but there could be more pain during yuan internationalization process
• Prefer 1-3-yr Chinese govt bonds; funding should stabilize over Oct.
  • Also short-end high grade bonds, which look attractive since yield widened 30-40 bps without significant changes in credit fundamentals
• NOTE: 1-month CNH Hibor rate up 16 bps to 3.712% today
  • Yield of 10-yr onshore and offshore China govt bonds are 2.736% and 3.2022% respectively; yield of 1-yr onshore and offshore China govt bonds 2.213% and 3.1324%
  • China markets closed this week for national holidays

(Bloomberg) -- Positioning analysis suggests hedge funds expect monetary policies to diverge more than real money investors, while both are long risk, Bank of America Merrill Lynch analysts led by Athanasios Vamvakidis and Myria Kyriacou write in note today.

• FX moves will depend on who is correct, which may lead to volatility even in a risk-on environment
• Analysis of in house data suggests:
• Buy volatility in major currencies, it could perform even in risk-on scenarios
• Long AUD and NOK against NZD and EM outside Asia could work in most scenarios, as AUD and NOK positions are not stretched
• Long NZD, long LATAM and EMEA in EM seem to be most stretched risk positions in FX
  • In a risk-on scenario, real money could be prompted to buy AUD and NOK
  • In a risk-off scenario, both real money and hedge funds could be prompted to sell NZD and EM outside Asia

(Bloomberg) -- Global rates may rise in next 12 months and lead to steepening of Korea’s interest-rate swaps curve, Frances Cheung, head of rates strategy, Asia ex-Japan at Societe Generale in Hong Kong, writes in note today.

• Korea’s 2y/5y part of the curve has tended to steepen when Fed hike expectations rose
• Domestic monetary policy expectation in Korea can mitigate increases for front-end KRW rates
• KRW rate market not pricing in much BOK easing, at around 25% chance of a 25 bps cut in next 12 mos.
• Recommends paying 5-yr KRW NDIRS vs receiving 2-yr KRW NDIRS, at a spread of 2 bps with target of 26 bps and stop at -10 bps
• 2-yr NDIRS steady at 1.2900%; 5-yr contracts up 1 bp to 1.3125%