Halister News

(Bloomberg) -- Spain to auction 0.25% 01/2019, 1.3% 10/2026, 2.9% 10/2046 for a combined EU3.5b-4.5b as well as I/L 1% 10/2030 for EU250m-750m at 10:30am CET.

• Mixed views from analysts; political risk, recent gains in SPGBs have most analysts looking at curve and cross-market trades

• SocGen (Marc-Henri Thoumin)
  • 3y has underperformed longer-dated issues through recent 2s5s flattening, as quest for yield continues, PSPP feeds flattening forces; don’t expect a reversal just now
  • 10y issue offers a good pick-up vs 2022 sector, which may help demand
  • 30Y has remained stable, offers limited value relative to the curve; expect modest interest in this bond

• Danske Bank (Jens Peter Sorensen)
  • Expect decent demand for 3Y, still solid spread to core bonds; linker bond also likely to go well given focus on rising inflation in the autumn
  • Difficult to see demand for the 30Y bond; possible change in the ultimate forward rate for European life insurance companies could give a boost to 30Y bonds such as Spain
  • Value in moving out into 10Y sector, given significant roll-down on the Spanish curve between 5Y, 10Y
  • Valuations vs Italy still stretched, even after repricing over past few days

• Santander (José María Fernández)
  • Auction offers good opportunity to switch into the 01/2019 SPGB and out of very expensive 10/2018 SPGB in ASW terms
  • 30y SPGB/bund spread stands ~7bps wider than the level that would be consistent with current 10y spread; like owning the 10/2046 SPGB in a box trade vs. 01/2029 SPGB with 10/2046 DBR and 07/2028 DBR
  • 10Y bonds could outperform Italy in the short run, however potential gains likely to be limited

• Mizuho (Antoine Bouvet)
  • Spain has been a notable underperformer vs Italy ahead of supply, parliamentary votes; see support outright around 1% in 10Y yields
  • Least optimistic around 3Y sale as yields have retreated to the –0.10% area but still offer less carry than BTP equivalent
  • 30Y SPGB expensive in the 20s30s Spain/Italy box; smaller than normal auction size leaves open possibility of a syndication as soon as next week (most likely 15Y) if sentiment recovers

• BBVA (Jaime Costero)
  • SPGB have rallied over summer, with some small correction seen ahead of auction; see little scope for SPGBs to rally further in comparative terms, for the time being
  • Auction bonds might be better bought within intra-curve trades
  • 3Y has clearly underperformed neighboring 04/2019 and 10/2018 bonds, showing further concession ahead of auction; now looks cheap vs fitted curve
  • 10Y has traded in line with neighbors, although repo pricing has richened; cross-market has cheapened vs both DBRs, BTPs although prefer to take a neutral stance
  • Ultra-long SPGBs have made a timid correction after recent flattening; bond looks comparatively cheap va fitted curve in 30Y sector, attractive in the switch vs 07/2040

(Bloomberg) -- Aggregate global credit market volumes may remain muted ahead of Friday’s U.S. jobs report and Labor Day holiday on Monday, but the start of a new month should spur net better buying interest in European risk assets, Bloomberg strategist Simon Ballard writes.

• Asian credit markets mixed overnight though sentiment buoyed by a bigger-than-expected rise in China’s official manufacturing PMI, which hit the highest level since 2014
• EUR, GBP and USD credit markets remain well-supported by macro backdrop and central banks’ asset-purchase programs
  • ECB and BOE QE should continue to offer backstop bids to EUR and GBP credit universes respectively through September
• We have updated our Risk Appetite Model, which highlights firm tone to credit markets as volatility trades at ytd low

• CDX IG closed +1.2bps at 76.30 in overnight session; iTraxx Asia Ex Japan IG currently +0.1bps at 113.07 and iTraxx Australia quoted +0.5bps at 100.06

NEWS

• Corporate News
• Pernod Ricard Forecasts Profit Growth as U.S., Spain Drive Sales
• Hays 1H Pretax in Line, Says U.K. ‘Sequentially Stable’
• Safestore Sees FY Earnings to Be Slightly Ahead of Expectations
• Veolia Environnement to Be First French Co. to Issue Panda Bond
• Mazda Recalls 130,000 Japan Vehicles Over Diesel Engine Flaw

• Financial News
• Macquarie Group Set to Cut Staff in BFS Unit, AFR Says
• China Banks End-June Wealth Mgmt Product Outstanding 26.28t Yuan
• Julius Baer Names Bhaskar Laxminarayan as Asia CIO
• Bremer Landesbank 1H 2016 Earnings Figures: Link

• Credit Rating News
• Fitch Affirms Hysan Development Company at ’BBB+’/Stable

• Other News
• Gross Calls for Two Fed Hikes at Double the Pace Seen by Market
• ECB Bonus Helps Finland Discover Sweet Spot in Negative Yields
• HSBC Sees $13 Billion of RBI Buying Boosting Best Asia Bonds

ANALYST VIEWS

• One should assume performance in coming months will be assured, and position for it. That means taking on higher beta risk -- or staying with it -- and looking for flattening trades: creditmarketdaily.com

NEW ISSUES

• Allianz $1.5b PNC5.5 Tier 2 3.875%
• Cofiroute EU650m Long 8Y MS +25, EU650m 12Y MS +35
• Delphi Automotive EU500m 12Y MS +120
• Finland EU3b 7Y MS -23
• GM Financial Co. EU750m 7Y MS +95
• Islandsbanki EU500m 4Y MS +200
• Nordea Bank EU1b 10NC5 Tier 2 MS +125
• NRW Bank $250m 3/2019 FRN Tap 3mL +20
• Slovenia EU1b 1.5% 3/2035 Tap MS +98
• Bureau Veritas EU500m 7Y MS +135, EU200m 10Y MS +180
• 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) -- Chinese factory PMI topped all survey estimates, which may reduce pressure for monetary easing; Malaysia’s ringgit and Korea’s won drop, weighed down by oil’s slump and losses in local stocks.

• China raises yuan reference rate by most in a week, fueling speculation it’s propping up the currency before weekend’s G-20 meeting
  • Aug. manufacturing PMI rose to 50.4 vs est. 49.8, reaching highest since Oct. 2014; it suggests PBOC won’t cut RRR, says ANZ
  • USD/CNH saw broad-based selling after Caixin PMI above 50 was viewed as confirmation of strong official PMI, says FX traders
  • Manufacturing expansion is at odds with factory closures during the month and slowing growth in services PMI, says RBC Capital Markets; U.S. payrolls Friday remains a key factor for USD/CNH
• Aussie gains on Chinese data as well as local capex survey, which RBA watches for signs that low rates are spurring business spending
  • Companies now plan to spend A$105.2b in 2016-17 vs est. A$97b; three months ago, they had planned just A$89.2b
• Ringgit underperforms Asian peers as trading resumes after yesterday’s holiday and oil’s overnight decline
  • Malaysia’s 5-year govt bond yields could be more influenced this month by a tilt in U.S. rates than domestic data; see chart analysis here
• Baht steady ahead of Thailand’s inflation data for August
  • CPI is forecast at 0.43% y/y, the least in 3 months
  • If the figure lags forecast, it may push USD/THB above 21-DMA; see analysis
• Rupiah declines in line with most EM currencies
  • Indonesia Aug. inflation is due; est. +3.02% y/y (3.21% prior)
  • Govt considers lowering GDP target in 2016 budget, Bisnis reports
• Won snaps two-day gain after South Korea’s August CPI rose 0.4% y/y vs est. 0.7%, well short of central bank’s 2.0% target
  • Current-account surplus shrank by 28% to $8.7b in July, the smallest in three months
  • Finance Minister Yoo said govt will seek to minimize economic & industrial impact from receivership filing by Hanjin Shipping
• Japan’s yen snaps six-day drop against dollar; FX options expiring today include strikes 103.00 for $782m and 103.90 for $830m
  • Persistent expectations of additional BOJ easing are weighing on yen amid weak economic data from Japan, says Nomura
  • 2Q capital spending rose 3.1% y/y vs est. 5.5%

(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

• Pratibha Industries
  • Long-term loan facilities cut to D from BB at Crisil
  • Cites recent delays in meeting debt obligations

UPGRADES

• Minda Industries
  • Cash credit facilities raised to AA- from A+ at ICRA
  • Cites strong growth in revenues

• Rajaguru Spinning Mills
  • LT loan facilities raised to BBB from BBB- at Crisil
  • Cites better-than-expected operating performance

• Wonderla Holidays
  • Term loan facilities raised to AA- from A+ at ICRA
  • Cites consistent improvement in operational, financial performance

(Bloomberg) -- Another 68% say Fed will not hike on Sept. 21 while 9% are unsure about FOMC’s decision this month, according to 287 FX clients in Citigroup survey.

• Futures markets see 36% probability of an increase
• Related story: Fed officials push financial stability to center of rate debate