Halister News

(Bloomberg) -- Credit markets are likely to be quiet during the European morning session ahead of the U.S. jobs report, which is the latest data point that will drive the debate over the Fed rate outlook. The data may struggle to move corporate bond valuations unless it comes out well below or above consensus, Bloomberg strategist Simon Ballard writes.

• August NFP due 2:30pm CET; est. gain 180k vs 255k prior
  • A number just below, but close to forecasts should be a sweet spot for risk assets, underscore low for longer terminal Fed funds rate and bolster investors’ hunt for yield
  • A weak number -- below 100k -- may trigger corporate spread weakness across the quality curve on implied deterioration of macro fundamentals
  • A strong number -- above 200k -- would renew September Fed tightening speculation; any backup in UST yields could damp the hunt for yield and trigger a steeper quality curve as investors pare HY bid
• Risk Appetite Model pricing in “low for longer” as the way forward for credit markets in September

• CDX IG closed +0.9bps at 77.24 in overnight session; iTraxx Asia Ex Japan IG currently +0.03bps at 113.02 and iTraxx Australia quoted -0.8bps at 99.06

NEWS

• Corporate News
• Toyota China Aug. Vehicle Sales Rise 1.8% Y/y
• Lululemon Falls 7%; 3Q Adj. EPS May Miss, 2Q Comps W/ DTC Trails
• Ingenico May Move After VeriFone Cuts EPS, Rev. Forecasts
• Tata Motors Rises After August Sales Climb 6% Y/Y

• Financial News
• Banks Win Converts in Campaign to Blunt Basel Capital Overhaul
• Lloyds Best Bank to Short Among U.K. Lenders, Bernstein Says
• Bank of Russia Revokes License of Bank Tetrapolis

• Credit Rating News
• Posco E&C Downgraded to Ba1 from Baa3; Outlook Kept Stable
• S&PGR Revises Sunac China Outlook To Negative; Afrms ’B+’ Rtg
• S&PGR Lowers To ’B-’, Puts On Watch Neg Neenah Enterprises Rtg
• Government of Maldives Assigned B2 Rating by Moody’s

• Other News
• BOJ Company Debt Binge Seen After 34% of Sovereigns Hoarded

ANALYST VIEWS

• U.S. equity investors are “wedged” between price- insensitive buyers of yield desperate to match liabilities on the one hand and the absence of visible earnings growth on the other: Jefferies
  • Investors should be aware the “reach for yield” is becoming increasingly distorted
• Corporate bond market will continue to grind tighter in spreads, lower in yield; the default rate will stay low, the bubble will expand some more but returns when we reset the counter for 2017 will not come in at anywhere near these levels as the juice runs dry: creditmarketdaily.com

NEW ISSUES

• Arrow Global (B1 Moody’s) GBP220m 8Y snr sec notes at 5.125%
• Saipem (Ba1/BB+) EU500m 4.5Y bonds at 3%; EU500m 7Y bonds at 3.75%
• Santander UK Group Holdings (Baa1/BBB/A) EU1b 7Y bonds at MS +117
• 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.

Securities and Exchange Commission filings are accessible under: {NI EDG } --ANDREW J. BARDEN

(Bloomberg) -- It’s not time for optimism on China’s bond market, as it’s clear PBOC aims for gradual deleveraging, Huachuang Securities analyst Qu Qing writes in a note today.

• Liquidity is still ample because institutional investors have been cutting leveraged positions due to higher cost of short-term funding, since PBOC resumed injection via 14-day reverse repos
  • PBOC will drain excessive funds through OMO to keep liquidity relatively tight to discourage leverage
  • Increasing yuan depreciation pressure will lead to volatility in money market
• Upcoming data may show improvement in Aug. economic activity; rebounding inflation would lead to further pressure on bond market
  • CPI to bottom out in Aug. and PPI to turn positive in Oct. on rising oil prices
• NOTE: Yield in 10-yr China govt bond has rebounded 11 bps since Aug. 15
  • Yield of 10-yr govt bond rises 1 bps today to 2.77% today

Related News and Information: First Word scrolling panel: FIRST First Word newswire: NH BFW To contact the reporter on this story: Emma Dai in Hong Kong at edai8@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

(Bloomberg) -- EM investors may be swayed by the FOMC decision this month as much as local factors as outperformance of EM assets post-Brexit may be at risk if Fed surprises with a rate increase. Politics will continue to hog the limelight in Brazil, Turkey and South Africa while EM central banks policy meetings will provide an insight into initial response to U.S. rates outlook.

• MAIN RISKS
• CEEMEA
• U.S. monetary policy outlook remains the key driver with FOMC meeting eyed; Rabobank sees any surprise hike in Sept. or Oct. as a source of risk to any constructive view on CEEMEA
• Locally, political risk is on the rise in South Africa where any departure of finance minister Gordhan may pave the way for further ZAR weakness
• Turkish lira ended August with ~1% of gains against USD, yet the outlook is uncertain amid geopolitical risks given the military presence in Syria and the country’s negotiations with EU over the refugee accord
• Turkey’s Recep Tayyip Erdogan and U.S. President Barack Obama will meet at G-20 meeting in China for the first time since Erdogan suppressed an attempted coup in July
• In Hungary, the central bank meets on Sept. 20 and market is bracing for more details about 3-month facility deposits which will be capped from October; if the limits imposed are large, it could be short-term negative for HUF, ING says

• LATAM
• Brazil’s impeachment process ended with Rousseff ousted and Temer confirmed in post until 2018; Congress debate on measures tied to fiscal adjustment will be back on traders’ radar and any related headlines are likely to be main potential BRL catalyst this month
  • If fiscal reforms advance, Brazilian real may test fresh YTD lows
• Colombia Central Bank confirmed most traders view to leave key rate unchanged at 7.75% at last meeting; fresh inflation data on Sept. 6 will be closely eyed to assess risk the central bank may resume its tightening cycle

• ASIA
• Rupee may strengthen near term as new RBI governor Urjit Patel, seen as an inflation fighter by some, takes the helm. Charts suggest USD/INR is close to making a decisive break below 200-day moving average, which if confirmed, could trigger a cycle of rupee strength into fourth quarter
• Malaysia’s 5-year govt bond yields could be more influenced this month by a tilt in U.S. rates than domestic data, even with a BNM decision due on Sept. 7. Treasury yields began turning higher in early July, helping to underpin Malaysian yields around 3.15%, levels last seen in 2013; click here for chart on relationship between normalized returns for 5- year Malaysia and U.S. bonds

• CALENDAR (based on local dates)
• Sept. 2: Singapore PMI
• Sept. 4: G-20 leaders meeting starts in Hangzhou, China
• Sept. 5: Turkey CPI; Colombia CPI; Chile IMACEC
• Sept. 6: Malaysia foreign reserves; South Africa GDP; Brazil minutes
• Sept. 7: China foreign reserves; Malaysia trade balance and central bank meeting; Taiwan exports; Poland base rate announcement
• Sept. 8: China trade balance; Mexico CPI; Chile CPI; Peru rate decision
• Sept. 9: Korea central bank meeting; Malaysia IP; China CPI, PPI; Poland sovereign debt to be rated by Moody’s; Brazil CPI
• Sept. 12: India CPI and IP
• Sept. 13: China IP and Retail Sales
• Sept. 14: Thailand central bank meeting
• Sept. 15: Indonesia trade balance; Colombia Minutes; Chile Rate decision
• Sept. 16: Singapore exports; Russia sovereign debt to be rated by S&P; Bank of Russia monetary policy decision
• Sept. 20: Hungary central bank meeting
• Sept. 21: Malaysia CPI
• Sept. 21-29: Taiwan central bank meeting
• Sept. 22: Malaysia foreign reserves; Indonesia, Philippines, Turkey, South Africa central banks meet
• Sept. 23: Singapore CPI
• Sept. 26: Mexico IGAE
• Sept. 29: Mexico rate decision
• Sept. 30: Korea IP; Turkey trade balance; Colombia rate decision; Brazil primary budget balance
• NOTE: Davison Santana and Mark Cranfield are FX strategists who write for First Word. The observations they make are their own and not intended as investment advice.

(Bloomberg) -- USD keeping a bearish tone after yesterday’s surprisingly soft ISM factory data, amid typically low volumes before the monthly U.S. employment report.

• Medium-term USD bears could be looking at jobs gain below median estimate at 180k based on the ISM miss
  • Click here for chart showing relationship between ISM factory index and nonfarm jobs
• GBP/USD is in focus, holding above its 50-DMA which was breached yesterday for first time since Brexit
• USD/CHF is another possible indicator of broad USD weakness as pair continues to be capped below 61.8% Fibonacci retracement of this year’s range; click here for chart
• Brent crude up 0.8% to $45.80/bbl, rising for first time this week
• Treasury 10-year yield up 1 bp to 1.584%
• USD/JPY consolidating above 55-DMA at 102.82 after hitting 104.00 yesterday for first time since late July
  • Any further rally would require fresh news supporting chances of a Fed rate hike, as well as expectations of BOJ easing, according to Bank of America
  • Sovereign curve for JGBs bear-steepens, with yields for 20-, 30- and 40-yr bonds all reaching the highest level in five months

• 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.

(Bloomberg) -- South Korea’s won leads the advance as most Asian currencies post small gains vs dollar after U.S. ISM factory index unexpectedly fell into contractionary territory, damping speculation of Fed rate increase this month.

• NOTE: U.S. Aug. non-farm payrolls are due tonight; Bloomberg median est. +180k (prior 255k)
• A U.S. jobs number above 180k may spur speculation of a more hawkish Fed at its Sept. meeting and leading to a firm USD in coming weeks, says Khoon Goh, head of Asia research at ANZ says
• China raises yuan reference rate for a second day ahead of G-20 summit, which starts Sunday in Hangzhou; 10-yr sovereign bond yield up 4 bps on week as PBOC easing bets are pared slightly
  • Avg daily turnover in yuan trading has doubled since 2013 to $202b, making it the most-traded EM currency, reports BIS
  • PBOC’s Yi says China is studying SDR-based financial products; also says nation has “policy toolbox” to keep yuan stable
• Vice Finance Minister Zhu says QE is no longer effective and won’t create sustainable growth
• Yen heading for second weekly decline against dollar
  • Japanese GDP shrank 0.3% in July, Nikkei reported yesterday
  • Now that BOJ owns 34% of JGBs, brokerages are betting its next step will be to boost its 6% stake in corporate bonds
  • S&P yesterday affirmed Japan’s A+ rating, outlook remains stable
• Ringgit bucks regional advances as WTI crude heads for biggest weekly decline since Jan.
  • Malaysia’s 5-year govt bond yields could be more influenced this month by a tilt in U.S. rates than domestic data, even with a BNM decision due on Sept. 7; see chart
• Won gains as data showed Korea’s 2Q GDP WAS revised upward to 0.8% q/q vs initial reading 0.7%
  • Option desks are shorting USD/KRW in front of large 1,120 strikes expiring today, according to an Asia-based FX trader
  • Vice Finance Minister Choi said yesterday excessive FX volatility or herd behavior can have hurt economy
• Singapore’s dollar little changed before release of Aug. PMI, which is forecast to rise to 49.4 for first advance since April
  • Singapore wages continue to outpace GDP growth; chart here
• MAS is making it easier for homeowners to refinance mortgages as some struggle with payments while the economy cools
• Kiwi gains for third day against dollar as data show New Zealand’s 2Q construction work rose 5.5% q/q vs est. 2.0%
  • Nation’s foreign exchange market handled $10.6b a day in April, down from $12.4b three years ago
• Peso rises as Bangko Sentral ng Pilipinas says it’s unsure the time is right to reduce the reserve requirement
  • Govt plans to seek lawmakers’ approval in first half of President Duterte’s 6-yr term for tax reform packages that would help it achieve target of boosting revenue by 3% of GDP by 2019

Economic Release Details: {KOGDPQOQ Index ECOD} --SEYOON KIM