HALISTER1: JGB Curve Flattens After ’Strong’ Super-Long Auction: Mizuho

JGB Curve Flattens After ’Strong’ Super-Long Auction: Mizuho

(Bloomberg) -- JGB yield curve flattens due to easing concerns over higher super-long yields following “strong” outcome of 30-year auction yday, says Hiroki Tsuji, a Tokyo-based market analyst at Mizuho Securities.
  • Weaker-than-expected U.S. ISM non-manufacturing index also provides support for longer-dated JGBs
  • Possibility of further flattening of JGB yield curve is rather small, however, given upcoming 20-year sale; adds there’s even a risk of curve steepening after BOJ’s meeting later this month; NOTE: 20-year auction due Sept. 13
  • While there could be some concern about tomorrow’s auction of 5-year JGBs as their yields have come down so far, demand for this tenor may be seen if speculation of a BOJ rate cut emerges
  • 5-year JGB yield down 2.5 bps at -0.175%, 10-year yield down 3.5 bps at -0.060% and 20-year yield down 6 bps at 0.350%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Hiroki Tsuji (Mizuho Securities Co Ltd)

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HALISTER1: India Outflows to Hurt Rupee, Liquidity If They Top $15b: BofAML

India Outflows to Hurt Rupee, Liquidity If They Top $15b: BofAML

(Bloomberg) -- Non-resident deposit outflows will depress INR and rupee liquidity only if withdrawals exceed $15b, BofAML economists including Indranil Sen Gupta write in note.
  • RBI is largely covered, as it had $23.9b of short-term long forward dollar positions on its books as of end-July
  • Banks may be unable to deliver more than $15b; nostro balances amount to $30.2b, but banks need to maintain $10b- $15b of working FX balances and $5b for Iran oil payments
  • INR may weaken if withdrawals exceed $15b, as Nov. will also see a parallel bunching of bank and corporate FX repayments when INR is seasonally weak
  • Rupee liquidity will be tight if RBI has to sell FX; resultant crunch would require RBI to conduct OMO purchases; RBI to OMO a further 1.1t rupees by March assuming $15b of withdrawals
  • Related story: New RBI chief Patel faces first test with $20b of outflows lined up
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Indranil Sengupta (Bank of America Corp)

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HALISTER1: INSIDE G-10: Yen Powers Ahead, BOJ Seen Divided; Aussie Slips

INSIDE G-10: Yen Powers Ahead, BOJ Seen Divided; Aussie Slips

(Bloomberg) -- Prevailing USD bearishness is reinforced as USD/JPY plunges after a Sankei report says BOJ is struggling to form a unified stance for its policy review this month.
  • USD/JPY hits a fresh September low at 101.21 on selling from leveraged accounts in early Tokyo session, traders say
  • Some sell stop-losses triggered vs model-based accounts and Tokyo-based banks
  • BOJ won’t expand stimulus this month given little deterioration in economic fundamentals, former BOJ executive Momma says
  • Fed’s Williams repeats his call for gradual hikes sooner rather than later, but he’s not committing on Sept. decision; his comments are having little impact
  • AUD/USD initial decline after 2Q Australia GDP and revised 1Q data is cushioned by corporate and macro demand under 0.7660; 2Q GDP up 3.3% y/y, matching estimates; 1Q revised to 3.0% from 3.1%
  • EUR/USD selling seen by two macro accounts next to large 1.1250 option strikes
  • USD/CAD little changed ahead of today’s BOC meeting
  • NOTE: Mark Cranfield is an FX strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER1: INDIA RATINGS: HBS Realtors, Maithan Ispat Cut; Lux Raised

INDIA RATINGS: HBS Realtors, Maithan Ispat Cut; Lux Raised

(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
  • HBS Realtors
    • NCDs cut to D from B at ICRA
    • Cites recent delays in debt servicing
  • Maithan Ispat
    • LT bank facilities cut to B(SO) from BBB-(SO) at Care
    • Cites revision in corporate guarantor Mideast Integrated Steels’ ratings due to delay in servicing of existing debt
  • TD Toll Road
    • Fund based limits cut to BB+ from BBB- at ICRA
    • Cites continued trend of low traffic density
UPGRADES
  • Home First Finance
    • LT bank facilities raised to A- from BBB+ at Care
    • Cites capital infusion, improved resource profile
  • Lux Industries
    • LT bank facilities raised to A+ from A at Care
    • Cites continued growth in operating income, improvement in profitability margins
  • MJ Castings
    • Term loans raised to A+(SO) from A(SO) at ICRA
    • Cites strong financial, managerial support
  • Ostro Jaisalmer
    • Term loan raised to BBB from BBB- at Care
    • Cites successful commissioning of project
  • Tri Solar
    • LT loan facilities raised to BB- from B at Crisil
    • Cites stabilization of its solar power plant, comfortable debt service coverage ratio
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
0811745D IN (HBS Realtors Pvt Ltd)
8441517Z IN (Home First Finance Co India Pvt Ltd)
LUX IN (LUX Industries Ltd)
1292966D IN (MJ Casting Ltd)
1283589D IN (Mesco Steel Pvt Ltd)

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HALISTER1: BIS Warns Bond Risks Rising on Tighter Liquidity, Regulations

BIS Warns Bond Risks Rising on Tighter Liquidity, Regulations

(Bloomberg) -- High-grade and liquid govt bonds such as those from the U.S., Japan and Europe are witnessing a significant drop in liquidity, and along with low rates, are posing heightened risks to financial stability, according to Bank for International Settlements.
  • Less counterparties are quoting in $50m trades and are taking longer to come up with quotes, Miklos Endreffy, senior portfolio manager at BIS said at a conference in Hong Kong yday
  • In Europe, players are defensive in offering high-grade credits, covered bonds where the ECB has a large footprint
  • Monetary easing and persistently low rates also alter investor behavior with a lot more risk-seeking behavior seen
    • Investors including pension funds, life insurers are being pushed into risky asset class as traditional sovereign bonds are being purchased by central banks
  • “So it really comes down to the risk of financial stability and how it can blow up very quickly,” Endreffy says, adding that “things can get ugly very quickly”
  • Correlation between bonds and equities have changed and markets are now more affected by central bank purchases
    • Central banks may never actually exit from these policies
    • Balance sheets may be permanently elevated
  • Money market reform, to be implemented in Oct., has led to rise in govt funds and fall in prime funds, which is depriving Japanese banks of a big source of dollar funding
    • Japanese banks are seeking alternative dollar funding by issuing commercial papers, a major reason why Libor has risen so fast
    • Investors may end up buying underlying Japanese govt bills, and swapping the FX proceeds for Libor plus 40-60 bps
    • Proportion of JGBs held by foreigners has risen due to activity from institutions such as SAFE, RBA and BIS
    • Money market reform has opened up a great outlet for dollar funds, provided investors are happy taking Japanese risk; this is also true for French CPs
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
BIZ SW (Bank for International Settlements)

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Miklos Endreffy (Bank for International Settlements)

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HALISTER1: Taiwan Exports Miss Could Halt USD/TWD Forwards’ Slide: Analysis

Taiwan Exports Miss Could Halt USD/TWD Forwards’ Slide: Analysis

(Bloomberg) -- A contraction in Taiwan’s exports in August could trigger a reversal in USD/TWD 1-month NDF’s near-term direction, Bloomberg strategist Andrew Robinson writes.
  • Exports probably rose 0.3% y/y after 1.2% growth in July, median est. in Bloomberg survey shows; ests. range from -7.7% to +3.8%; data due 4pm local time
    • Related data may show imports fell 4.3% y/y last month and trade surplus widened to $4.13b from $3.61b: other surveys
  • NDF could retrace back to 50-DMA, currently at 31.717; forward has not traded above this moving avg since June 28
    • 1-mo. NDF is holding above 31.010 level, which is 76.4% Fibonacci retracement of the rally from Aug. 10 to 22
  • NDF now up 0.2% at 31.115 after earlier touching 31.031, matching Aug. 17 low
  • NOTE: Andrew Robinson is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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