HALISTER1: Short USTs Amid Asymmetric Risk in Bonds, Long Stocks: Carmignac

Short USTs Amid Asymmetric Risk in Bonds, Long Stocks: Carmignac

(Bloomberg) -- The pressure on governments to retake control through fiscal and budget policies is a pivotal paradigm shift for equity and fixed-income markets, so need to be doubly alert in coming months, Didier Saint-Georges, managing director at Carmignac, writes in monthly investment note.
  • Should convincing fiscal stimulus materialize, equity markets could find the support they currently lack and the bond market would be highly vulnerable, especially as inflation pressure starts to build
  • NOTE: Draghi emphasized the need for fiscal stimulus at yday’s press conference, citing the G-20 statement, while in the U.K. Chancellor Philip Hammond said he will consider his fiscal response in the Autumn statement
  • A shift to fiscal stimulus isn’t guaranteed, which is reflected in bond markets with 30Y UST yields close to all- time lows
  • In the U.S., it can take a long time for actions to follow words and such a move would require a degree of political courage in Europe and Japan which we’re not unaccustomed to
  • Bond markets could still hold up even if the economy disappoints, although at current levels the upside potential would be very limited
  • The extension of highly accommodative monetary policies and the possibility of economic support packages mean the outlook is brighter for equity and credit markets
  • If economic data disappoints in 4Q, may see a reversal of the expectations built into cyclical stocks; if inflation data surprise positively at the same time, that could also hurt yields even with weak data
  • Took some profits in credit in August after spreads narrowed; is positioned for higher inflation in the U.S., with shorting 10Y U.S. interest rates via futures
  • In equities, significantly increased equity allocations from June and raised EM exposure in August
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Didier Saint-Georges (Carmignac Gestion SA)

To de-activate this alert, click here

UUID: 7947283

HALISTER1: Brazilian Real Drops With EM; DI Rates Rise, CPI Meets Estimate

Brazilian Real Drops With EM; DI Rates Rise, CPI Meets Estimate

(Bloomberg) -- BRL declines, paring weekly gains, with most of EMFX market falling amid uncertainties over central banks.
  • BRL falls 0.8% to 3.2395 per dollar; DI Jan 21 rate +8bps
    • Inflation IPCA m/m Aug., 0.44%, est. 0.44% (prior 0.52%)
  • Market to show when Brazil ready for rate cut, Goldfajn says
  • Senate refrains of voting urgency for top court judges salary raise; proposal was seen as hurdle for Temer budget fix effort
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Ilan Goldfajn (Banco Central do Brasil)

To de-activate this alert, click here

UUID: 7947283

HALISTER1: NewDay Funding 2016-1 plc - DBRS Rating Report

NewDay Funding 2016-1 plc - DBRS Rating Report

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

People
Ciaran Gorman (Barclays PLC)
David Windisch (Trenchant Ltd)
HSBC HSBC Bank (HSBC Securities Inc)
Hiroshi Saito (Sbi Liquidity Market Co Ltd)
Kevin Chiang (DBRS Ltd)

Topics
Fixed Income Research
Reports
Credit Analysis Research
Credit Research
Investment Research

To de-activate this alert, click here
To modify this alert, click here

UUID: 7947283

HALISTER1: Swiss Probing 172 Fifa-Related Money-Laundering Allegations: T-A

Swiss Probing 172 Fifa-Related Money-Laundering Allegations: T-A

(Bloomberg) -- Switzerland’s Attorney-General’s office investigating 172 reports from Money Laundering Reporting Office “in this context,” spokeswoman Linda von Burg says in e-mailed statement.
  • Burg responded to a question about report in Tages-Anzeiger
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Topics
World Football

To de-activate this alert, click here

UUID: 7947283

HALISTER1: ROUNDUP: Italy Referendum May Provide BTP Dip-Buying Opportunity

ROUNDUP: Italy Referendum May Provide BTP Dip-Buying Opportunity

(Bloomberg) -- Analysts are warning that markets are too complacent on Italy’s political risk ahead of the constitutional referendum due later this year, but investors see the vote as a buy-on-dip opportunity for BTPs.
  • Chances of Italy issuing a 50-year bond amid the increasing political risk are in place
    • UniCredit sees the week of Sept. 19 as a “window of opportunity” for the bond sale; Natixis sees risk of the Treasury receiving a poor response, while Vanguard expects any 50-year to meet market interest
  • There are signs of complacency in the market: 10Y BTP yield has fallen ~40bps since the Brexit vote to 1.16% while the cost of hedging against any EUR fallout using structures expiring around the Italian referendum (expected in late November or early December) remains near year-to-date lows
  • Morgan Stanley
    • Italian bonds, European equities underprice the risk of Italy’s upcoming constitutional referendum, analysts and economists including Daniele Antonucci write in a research note
    • Assigns a 35% chance to the ‘Yes’ camp winning the referendum
    • Sees markets too complacent about the vote outcome and its impact; govt losing the referendum would further delay urgently needed economic and banking reforms that have proved difficult even under Prime Minister Renzi’s pro-business agenda
    • SPGBs, EU credit and EUR are pricing the risk more fairly compared to govt bonds and equities
    • Advises selling BTPs vs USTs, selling EU stocks vs U.S. counterparts and buying 3m vs 12m volatility in EuroStoxx as too little political uncertainty is priced in
  • Natixis
    • A “No” vote at the referendum is not priced into market and may lead to a BTP spread widening, strategist Cyril Regnat writes in e-mailed comments
    • There would be a bear-steepening of the curve starting on 5-year tenor with the worst on 30-year
    • First target at 160bps on a “No” vote and with Renzi leaving
    • In event of snap elections and M5S winning, a level between 2% and 2.5% for the 10Y BTP wouldn’t be surprising with Spain about 50bps below
    • Given the prospect of increased political uncertainty, it would probably be more convenient for Italy to keep issuing 30-year bonds ahead of the referendum instead of selling a 50-year bonds
  • Commerzbank
    • The importance of the referendum is underpriced, but thanks to the ECB’s very aggressive stance, any fallout should be contained medium-term even in the case of a negative outcome that is still likely to cause near-term pressure, strategist David Schnautz says in e-mailed comments
    • Says Italy’s referendum is among the reasons to keep a cautious stance on peripherals in general at this juncture; still, likes spread exposure medium to long- term
    • Favors standing ready to use a referendum-induced setback as a buying opportunity for benefiting from an ongoing hunt-for-yield environment
  • Goldman Sachs
    • Assigns a 40% probability to the constitutional reforms being rejected, analysts including Francesco Garzarelli write in research note
    • With a low likelihood of early elections even if the ‘No’ camp wins, and with Bank of Italy buying bonds, doesn’t see scope for a material widening in BTP spreads
    • Italian sovereign bonds to trade above Spain’s unless any change in opinion polls suggesting the ‘Vote Yes’ camp is gaining ground ahead of Italy’s vote on constitutional reform this year
  • Vanguard
    • Any selloff in BTPs in the aftermath of Italy’s constitutional referendum would offer an opportunity to reset long positions into peripheral euro government bonds, Nick Eisinger, London-based strategist says in phone interview
    • Favors Italian vs Spanish bonds as BTP market offers better liquidity and has a more developed futures market
    • Doesn’t see the referendum leading to any systemic issue for Italy as investors are getting used to dealing with the political uncertainty
    • Says Italy would be in “good company” if it issues ultra-long debt, as Spain did the same last May before holding general elections in June; any 50-year bond issuance from Italy would probably meet good demand from investors
  • Investec Wealth & Investment
    • Spreads are likely to be range-bound until we have clarity on the outcome of the vote as there is some complacency currently in the market, Shilen Shah, bond strategist, says in e-mailed comments
    • Fund has limited exposure; however, a spike wider would be a buying opportunity depending on the fallout
  • Pioneer
    • Fund took profit on a long Italy trade opened after Brexit; now neutral on the country, planning to go into the last quarter of the year with a neutral stance on peripherals given rising political risk in the area, head of government bonds Cosimo Marasciulo says in phone interview
    • Fund is in favor of increasing Italy duration risk while not boosting country risk; would consider taking part in Italy 50-year bond offer
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
UCG IM (UniCredit SpA)

People
Cosimo Marasciulo (Pioneer Investment Management Ltd/Dublin)
Cyril Regnat (Natixis SA)
Daniele Antonucci (Morgan Stanley)
David Schnautz (Commerzbank AG)
Francesco Garzarelli (Goldman Sachs Group Inc/The)

To de-activate this alert, click here

UUID: 7947283

HALISTER1: Markets Too Complacent on Near-Term Norges Bank Easing: Danske

Markets Too Complacent on Near-Term Norges Bank Easing: Danske

(Bloomberg) -- Weaker-than-expected August Norway CPI data illustrates the one-off distortions of food and airfares in elevated July print, with investors too complacent about risk of near-term Norges Bank easing, Danske Bank analyst Kristoffer Kjaer Lomholt writes in e-mailed comments.
  • Investors last month completely repriced Norges Bank monetary policy for the September meeting based on CPI and housing market inflation prints
    • These concerns have diminished with today’s data, in addition to talk of tougher macro-prudential measures to stem house price growth
  • One-off rise in food and airfares that led to elevated July CPI print have dropped out
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
1037Z NO (Norges Bank)

People
Kristoffer Lomholt (Danske Bank A/S)

To de-activate this alert, click here

UUID: 7947283

HALISTER1: JAPAN RATES WEEKLY: JGBs Vols Rise on Uncertainty Over BOJ View

JAPAN RATES WEEKLY: JGBs Vols Rise on Uncertainty Over BOJ View

(Bloomberg) -- Actual volatility of Japanese government bonds is set for weekly advance, first in four weeks as super-long tenors swing amid uncertainty over BOJ’s policy direction and strong results from 30-year JGB auction.
  • Steepening trend of sovereign yield curve pauses while 10y-30y spread swung widely this week
    • Click here for a weekly change in the sovereign yield curve and here for a market snapshot
  • 30-day price volatility on Japan’s bonds with maturity of more than 10 years rose 5.45 bps this week through Sept. 8 to 7.083%, according to Bloomberg data
  • USD/JPY heads for biggest weekly decline in 6 wks
  • BOJ studying options to steepen bond yield curve, Reuters reports on Sept. 9
  • Governor Kuroda said on Sept. 5 any additional monetary easing entails costs, but won’t consider cutting level of policy accommodation
  • PM Abe’s adviser Hamada said on Sept. 6 BOJ should wait for Fed before acting
  • BOJ won’t expand stimulus this month, former BOJ executive Momma said on Sept. 7
  • BOJ Deputy Governor Nakaso’s said on Sept. 8 the central bank will decide at its policy meeting this month whether it’s necessary to adjust its current easing program
  • MOF proposed 40-year JGB issuance boost by 400b yen for fiscal year on Sept. 8
  • 30-year bond auction drew higher bid-to-cover ratio, tops estimate on Sept. 6 and 5-year bond auction drew lowest bid- to-cover ratio in 11 months
    • Finance Ministry to auction 1.1t yen of 20-year bonds on Sept. 13 and 200b yen of enhanced-liquidity on Sept. 15
  • NOTE: JGBs worth about 19t yen ($184b) will mature this month (excluding T-bills, linkers and floating bond), with large proportion Sept. 20, according to data compiled by Bloomberg
  • WHAT THEY SAY
  • Sumitomo Mitsui Asset Management (Jun Fukashiro, senior fund manager)
    • Speculation about possible reduction in QE size, in the form of providing more flexibility to amount of govt bond purchases, resumed, triggered by remarks from BOJ Deputy Governor Nakaso
    • The BOJ also skipped repurchases of long-end bonds in operation today, boosting view they may want to steepen the curve; this led to some increase in yields
    • JGB markets may remain unstable until BOJ meeting later this month
    • Focus next week will be the 20-year note auction and U.S. data that may provide some clue to the Fed’s rate hike outlook
  • Mitsubishi UFJ Trust & Banking (Hideo Suzuki, chief manager of forex and financial products trading)
    • Key factor driving JGB markets next week will be 20-year note auction; 20-year yield rebounds above 0.4%, easing concern about weak auction results
    • Any weak auction may lead to bond selling temporarily but yields may be range bound ahead of the BOJ meeting this month
    • BOJ unlikely to reduce QE amount from 80t yen or provide the range for QE amount to make the average purchase amount at 80t yen; it may expand negative rates if needed
    • All in all, rise in yields of bonds with 10 years or less may be limited and unlikely to rise above zero
  • MassMutual Life Insurance (Satoshi Shimamura, head of rates and markets at investment strategy department)
    • Steepening of curve is likely to end while volatility may continue toward policy meeting later this month
    • While issuance of super long-end bonds increases, BOJ won’t probably have an option to reduce amount of bond purchases
    • Governor Kuroda may say the flattening move after introduction of negative interest rates was excessive and would consider the negative impact on the economy
    • 20-year auction may not be too bad if the yield is around 0.4%; there’s speculation about life insurance companies buying the super long-tenor notes
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Hideo Suzuki (Mitsubishi UFJ Financial Group Inc)
Jun Fukashiro (Sumitomo Mitsui Asset Management Co Ltd)
Satoshi Shimamura (Massachusetts Mutual Life Insurance Co)

To de-activate this alert, click here

UUID: 7947283

HALISTER1: INSIDE TAIWAN: TWD Dips as Investors Brace for Extra Trading Day

INSIDE TAIWAN: TWD Dips as Investors Brace for Extra Trading Day

(Bloomberg) -- Taiwan dollar falls most in over 2 months as local stocks slid amid disappointing new iPhone and geopolitical tension as well as a special trading day tomorrow ahead of next week’s holidays; bonds decline.
  • TWD falls 0.7% to 31.510 per dollar today, most since June 24, and eroding weekly gains to 0.6%
  • Taiwan shares decline most in two months after iPhone 7 launch; overseas investors sell Taiwan equities first time in six days, net selling $7.6b ($241.4m)
  • Foreign investors have adjusted their positions to prevent any potential risk, since Taiwan trades tomorrow, Jih Sun Securities economist Cary Ku says
    • Local tech stocks under selling pressure since new iPhone provides no surprise and Apple share price fell yday
    • North Korea’s nuclear bomb test also damages sentiment
    • Correction likely short-lived and USD/TWD to trade ~31.5, because Fed Sept. hike unlikely
  • Rebound in U.S. Treasury yield overnight, local 10-yr bond yield’s inability to trade lower yday, and rising expectation that CBC will not cut interest rate, are spurring correction in govt bonds today, Fubon Financial bond trader Edward Chang says
    • Sees low trade volume tomorrow, yield of 10-yr bond within 0.65%-0.69%
  • Yield of 0.625% Taiwan govt bond due Sept 2026 rises 2 bps today to 0.6770, declining 1 bp this week
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Cary Ku (Jih Sun Securities Co Ltd)

To de-activate this alert, click here

UUID: 7947283