Halister News

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

(Bloomberg) -- While EM assets may bounce back, “it’s more and more likely that the Fed will start to act and we recommend all companies to sell bonds as soon as possible,” Andrey Solovyev, global head of debt capital markets at VTB Capital in London, says by phone.

• 01 Properties, Otkritie are monitoring Eurobond market; needs to talk to investors before announcing price guidance on 01
• NOTE: Russian Companies Line Up Eurobonds as UBS Sees Dozen New Sales
• On Global Ports sale this week: yields were better at end of August, but after Friday’s selloff in EM, weren’t sure yields would return to lower levels
• NOTE: Global Ports Eurobond Almost Three Times Oversubscribed: Lead
• NOTE: PRICED: Global Ports $350m 7Y Priced at Par to Yield 6.5%

(Bloomberg) -- Recent sell-off after last week’s ECB decision has spurred investors to add positions in some peripherals, though expect some to remain in wait-and-see mode before FOMC next week, BBVA strategist Jaime Costero writes in a client note.

• Activity has been pretty high in SPGBs this week and has been mainly supported by non-European banks, largely from Asia, buying in the very front end
  • European banks have been buying in the 1Y-5Y sector, with local banks and ALMs buying across the curve
  • In addition, there has been some hedge fund selling in the front end and in 10Y areas, with domestic insurance demand seen in the long-end
• NOTE: Spain 10Y bonds have outperformed BTPs by ~15bps over past 6 sessions; front end has outperformed sharply, with 5s30s curve steeper by ~18bps over the same period

(Bloomberg) --Credit spreads drifting wider in recent sessions and steepening of quality curve with rates selloff has damped secondary mkt risk appetite, although primary mkt flow remains buoyant. Spreads not yet seen as at wholesale relative value re-entry point, Bloomberg strategist Simon Ballard writes.

• Overhang of macro, monetary policy uncertainty fueling more discerning investor approach to risk
  • Ziggo (Ba3/BB-) 10y EUR/USD expected new issue may be litmus test for depth of risk appetite going into 4Q; revives specter of shareholder-friendly initiatives with proceeds said for partial refinancing of term loans but also distribution to shareholders
• Despite strong close to U.S. credit/equity mkts and Asian/Australian risk assets trading better overnight, futures market suggests modest downside risk to EUR corp bonds this morning

• Risk Appetite Model stable as secondary market corp bond spreads continue to edge wider in unison
• Bloomberg Barclays Eur-Agg Corporate index closed yday at 110bps (+1bp); Bloomberg Barclays Eur HY index closed at 407bps (+18bps)
• CDX IG closed -2.8bps at 77.06 in overnight session; iTraxx Asia Ex Japan IG currently -0.1bps at 112.53 and iTraxx Australia quoted -1.3bps at 98.75

NEWS

• Corporate News
• Telenor $1b Bond Exchangeable for VimpelCom ADSs W/ 0.25% Coupon
• BlackRock Joins Investors Taking Legal Action Against VW
• Le Noble Age Confirms 2016 Targets as 1H Op. Profit Gains 27%
• Claire’s Elects to Delay Interest Payments
• Solar Industries Cuts FY17 Rev. View on Forex, Lower Prices
• Wizz Air to Start Route From Sofia to Georgia’s Kutaisi in Sept.
• Tanzania Cigarette Co. Half-Year Profit Up 8% to TZS36.5b

• Financial News
• Deutsche Bank Rebuffs U.S. Over $14 Billion Mortgage Claim
• SVG Says Harbourvest Offer Undervalues Co, Has Other Approaches

• Credit Rating News
• Newcrest Outlook Moved to Positive at S&P On Debt Reduction

• Other News
• U.S. Long Bonds Give Traders Lesson in Risk With September Rout
• Bail-In Talks in Sweden Zero In on Refinancing Risks to Banks
• Loaded With Cash, Some European Banks Still Have to Sell Bonds

ANALYST VIEWS

• A jittery week, but not too indecent for corp bond mkts. It should be a quiet session today, but we ought to be on the up given the 1% rise in US stocks: creditmarketdaily.com
• The experience from February’s selloff suggests CoCo mkt could be vulnerable should fears of coupon cancelations flare up again; with EUR CoCo spreads hovering around levels seen in early Feb, and about 200bps below subsequent selloff highs, we continue to suggest remaining defensive, waiting for higher visibility to emerge: Commerzbank

NEW ISSUES

• Deutsche Bahn EU500m 12Y MS +20
• Swiss Life EU600m PNC 5/2027 Subord MS +410
• Lithuania EU450m 2.125% 10/2035 Tap MS +28
• 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.

--ANGELA CULLEN

(Bloomberg) -- Here’s a roundup of Indian co. debt-rating changes.

• To get this story sent to your inbox real-time, run NI INRATINGS , click on Display & Edit, then Set Alert Delivery

DOWNGRADES

• Bhagwati Ferro Metal
  • Long-term fund-based limits cut to BBB- from BBB at ICRA
  • Cites sharp decline in profitability due to decline in steel prices

• Bhagwati Steel Cast
  • LT fund-based limits cut to BBB- from BBB at ICRA
  • Cites decline in sales

UPGRADES

• Nilkamal
  • LT fund-based bank limits raised to AA from AA- at Care
  • Cites significant improvement in operational performance

(Bloomberg) -- Bank of Japan heads into next week’s seminal policy review with investors positioning for a steepening of the yield curve, though questions remain over how it will achieve that.

• Reports from media including Nikkei and Kyodo have suggested a range of options for BOJ, including cutting purchases of bonds with more than 25-yr tenor and deepening negative rate. Sankei and WSJ say BOJ is struggling to form unified opinion
• Since last BOJ meeting on July 29, when the bank said it would review the framework of monetary policy this month, spread between 5- and 30-yr notes has expanded by ~23 bps to about 75 bps, according to data compiled by Bloomberg
• MassMutual says it’s keeping a position to bet on the steepening of the yield curve, with Morgan Stanley expecting BOJ to reduce purchases of long-dated JGBs
• Other than expectations on the yield curve, views on what else BOJ will do and how it will achieve its aim vary. Here are some trading recommendations:

On rates:

• BNP Paribas (Tomohisa Fujiki, chief rates strategist)
  • Recommends being long on 5-yr bonds heading into BOJ meeting because of growing speculation of a deepening of negative interest rates
  • Even if BOJ refrains from cutting rates, speculation of such a move will be kept alive
  • Given expected volatility, could hedge position via paying 1y1y-forward swaps, 2-yr or 5-yr interest rate swaps when the market rallies
  • Though there’s uncertainty over BOJ’s purchases of super long-end of bonds, yields of 0.5% for 20-yr debt and 0.6% for 30-yr bonds are good levels to buy

• MassMutual Life Insurance (Satoshi Shimamura, head of rates and markets, investment strategy)
  • Plans to keep a position to bet on steepening of 5-yr and 30-yr yield curve toward the BOJ meeting
  • Based on some media reports, there’s a risk the long- term bond repurchase plan for Oct. may be announced at the time of policy decision
  • Yield for 40-yr debt may eventually rise to ~0.75%, providing room for 5-yr and 30-yr spread to expand further
  • Market may stabilize by pricing in BOJ’s new policy decisions gradually. Auctions of 40-yr notes on Sept. 27 and 10-yr debt on Oct. 4 will be barometers post-BOJ meeting
  • Position to bet on steepening of curve will probably work until market stabilizes

• Sompo Japan Nipponkoa Asset Management (Shinji Hiramatsu, general manager of fixed-income investment department)
  • BOJ may want to cut negative rates further while steepening the yield curve, and market has priced in that expectation since July 29
  • Central bank is unlikely to cut the amount of QE, which would be seen as paring monetary easing and may impact the yen
  • Plans to stay on sidelines by reducing any risks toward the decision and may take positions after seeing market reaction

On yen:

• Societe Generale (Kyosuke Suzuki, head of FX and money market sales)
  • If BOJ refrains from taking action next week, the yen may strengthen even if the bank shows its commitment for more easing in the future; USD/JPY may temporarily fall below 101
  • Recommends investors buy USD/JPY on dips
  • Optimism that BOJ will ease in the future and Fed’s stance for monetary tightening mean gains in yen may be limited, providing USD/JPY buying opportunity; less chance for USD/JPY to break 100-105 range either way in medium term
  • Likes being long on EUR/JPY as ECB seems to be nearing end of its easing cycle while BOJ’s stance will probably last longer, weighing on yen vs euro
  • Around 115 would be good level to buy the pair

• SBI Securities (Tsutomu Soma, general manager of fixed- income department)
  • BOJ likely to cut rates and/or increase type of securities it buys under QE
  • Decision is unlikely to lead to significantly weaker yen because market has priced in some form of easing
  • More downside risk to USD/JPY than upside because no action from BOJ would mean stronger yen while Fed staying on hold the same day would also send USD weaker vs JPY
  • Near 101 is a good level to buy USD/JPY, while closer to 104 is a level to sell as the pair is likely to remain mostly in 100-105 range medium term