HALISTER1: GBP 5y5y Forward Swap Continues to Trade Rich vs EUR Equivalent

GBP 5y5y Forward Swap Continues to Trade Rich vs EUR Equivalent

(Bloomberg) -- GBP swap forwards continue to trade rich vs EUR equivalents, Bloomberg strategist Tanvir Sandhu writes.
  • GBP 5y5y forward swap rate vs EUR spread at 23bp, near narrowest level since Nov. 2012
  • See 1-year regression analysis here; R^2 at 0.65, y=0.289x+0.114, highlighting the RV dislocation
  • GBP OIS forwards currently pricing 51% probability of a 15bp BOE rate cut to 0.10% by Dec. vs 68% 5-days earlier, assuming 3.5bps Sonia-base rate corridor
  • Eonia currently pricing 37% odds of a 10bps ECB deposit rate cut in Dec. vs 49% 5-days earlier, assuming 6bps Eonia-depo rate corridor
  • NOTE: GBP rates volatility may extend decline toward EUR equivalents, see more here from Aug. 5
  • NOTE: GBP rates skew signals implicit floor as distribution of expected rates narrows, see more here from Aug. 2
  • NOTE: Tanvir Sandhu is an interest-rate and derivatives 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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UUID: 7947283

HALISTER1: EUROPE RISK TIMELINE: ECB in Focus as Politics Ends Summer Lull

EUROPE RISK TIMELINE: ECB in Focus as Politics Ends Summer Lull

(Bloomberg) -- Expectations for the ECB rate decision in September are easing even as political risks remain at the forefront of investors’ minds.
  • MAIN RISK EVENTS:
  • Central banks in focus, with ebbing bets for ECB easing this month as data suggests Brexit impact still limited
    • Difficult to imagine Draghi will miscommunicate to an extent that he spurs significant re-pricing in markets; he may signal could be delivered in October or December, which would be only moderately disappointing, JPMorgan strategist Gianluca Salford says
  • Attention also on BOJ after its last meeting fell short of expectations but market talk of helicopter money persists, while Fed watchers still split on possibility of a rate rise as soon as next month
  • U.K. parliament returns and focus will be on next steps, timing for triggering Article 50 to begin Brexit talks and the government’s fiscal plans
  • Italian and Spanish politics back on investors’ radar, while German regional elections will be parsed for signs of Merkel’s performance in next year’s vote
  • With oil holding just below $50, meeting between OPEC and other oil producers is also a key event next month
AUGUST
  • 30: BOE buys bonds with 15Y+ maturity (see prior result)
  • 30: German CPI
  • 31: Spain’s acting PM faces confidence vote
  • 31: U.K. PM May, cabinet to meet at Chequers to discuss Brexit
SEPTEMBER
  • 1: U.S., Japan introduce new collateral rules on swaps market
  • 2: Spain’s acting PM may face second confidence vote
  • 2: U.S. non-farm payrolls
  • 2: Fitch may review Greece, Finland ratings
  • 4/5: G-20 summit in Hangzhou, China
  • 4: Mecklenburg-Western Pomerania regional elections
  • 5: U.K. parliament reconvenes
  • 5: U.K. August services, composite PMI
  • 6: BOE buys bonds with 15Y+ maturity
  • 8: ECB rate decision; JPM sees little to spur new measures
  • 9: DBRS may review Finland’s rating
  • 9: Eurogroup meets in Bratislava
  • 13: BOE buys bonds with 15Y+ maturity
  • 13: U.K. August CPI
  • 14: U.K. August claimant count; July average weekly earnings
  • 15: BOE rate decision
  • 16: First EU summit without U.K. takes place in Bratislava
  • 16: S&P Global Ratings may review Portugal’s rating; DBRS may review Italy; S&P may review Finland
  • 18: Berlin regional elections
  • 19: BOE term funding scheme drawdown period begins
  • 20: BOE buys bonds with 15Y+ maturity
  • 21: U.K. August Public Sector Net Borrowing
  • 21: BOJ rate decision, Governor press conference
  • 21: Fed rate decision; some analysts say likelihood of a Sept. rate hike has risen
  • 22: TLTRO II take-up
  • 25: Election in Spain’s Basque country
  • 25-28: U.K. Opposition Labour Party conference in Liverpool
  • 26: Tentative date for the first U.S. presidential debate; Trump says he’s not happy the debates compete with NFL games
  • 26/28: OPEC, other oil producers meet
  • 28: Catalonia confidence vote after region approves secession
  • 29: German September CPI
  • 30: S&P may review Spain’s rating
OCTOBER
  • Italian referendum on constitutional reform may take place this month or in November; Barclays analysts say Italy faces risk of political upheaval without reform
  • Deadline to form a govt in Spain is end-Oct; no agreement would mean a third general election
  • Second progress review of Greece reforms expected to begin
  • 1: Michel Barnier starts role as EU’s chief Brexit negotiator
  • 2: Hungary referendum on whether the EU should be able to order the country to accept the settlement of migrants
  • 2: Austria presidential election re-run
  • 2-5: U.K. ruling Conservative Party conference in Birmingham; may discuss Brexit, fiscal stimulus
  • 5: U.K. September services, composite PMI
  • 6: ECB policy meeting account
  • 9: Possible date of second U.S. presidential debate
  • 14: SEC’s money market reforms take effect
  • 15: Hearing begins for lawsuit on seeking to force U.K. PM to consult parliament before initiating Brexit
  • 15: Deadline for Spain, Portugal to take action on budget deficits
  • 19: U.K. Sept. claimant count; August average weekly earnings
  • 20: ECB rate decision
  • 21: U.K. September Public Sector Net Borrowing
  • 21: Fitch may review Italy’s rating; S&P may review France’s; DBRS may review Portugal
  • 27: U.K. advanced 3Q GDP
  • 28: German October CPI
  • 28: S&P may review U.K. credit rating; the ratings company downgraded U.K. to AA vs AAA with a negative outlook in June
NOVEMBER
  • U.K. Chancellor’s Autumn Statement, expected to include some fiscal measures to counteract the risk of recession, may take place this month or in December
  • 3: U.K. Oct. services, composite PMI
  • 3: BOE rate decision, minutes, Inflation Report
  • 3: ECB publishes economic bulletin
  • 11: S&P may review Italy’s rating
  • 15: U.K. Oct CPI
  • 16: U.K. Oct claimant count; Sept average weekly earnings
  • 23: Euro-area preliminary Nov. services, composite PMI
  • 27: Italy may hold referendum on constitutional change
  • 29: German Nov CPI
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Gianluca Salford (JPMorgan Chase & Co)

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HALISTER1: Proxy for EUR 5s15s Conditional Bear-Steepener Via Payers: SG

Proxy for EUR 5s15s Conditional Bear-Steepener Via Payers: SG

(Bloomberg) -- Recommend financing payer spreads in long-maturity rates by selling payers in short or intermediate tails, Societe Generale strategist Adam Kurpiel writes in client note.
  • Forwards are pricing a very moderate potential for long rates to increase
  • On horizons above 1y, they imply a 5s15s bear flattening, at odds with the curve directionality
  • Buy EUR 1y15y ATMF/+45bp payer spread, sell 1y5y ATMF payers; PV01-weighted, zero-cost
  • Version of the trade is to replace the 1y5y vanilla payer with the 1y2y3y mid-curve payer, allowing to buy 1y15y ATMF/+70bp payer spread
  • Bearish risks loom; ECB and BOJ may be mulling policy-easing options that are less bond-friendly than before; new issuance flow and possible ECB decision to tweak PSPP keep the long-end at risk, at least in relative terms
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Adam Kurpiel (Societe Generale SA)

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HALISTER1: MORE: Taiwan Premier Asks Task Force to Probe Mega Case Details

MORE: Taiwan Premier Asks Task Force to Probe Mega Case Details

(Bloomberg) -- Govt task force seeks to clarify accountability of Mega Bank case in 2-3 weeks, Premier Lin Chuan says.
  • Mega Bank executives are visiting N.Y., Panama branches to communicate with authority on related subjects
  • Lenders’ N.Y. branch was fined for notification issue; Taiwan can’t confirm whether the bank was involved in money laundering immediately
  • Lessons learned as banks need to improve anti-money laundering measures, regulation compliance, internal audits: Lin
  • NOTE: Mega Fined $180m by N.Y. Over Anti-Money Laundering Law Link
  • NOTE: Taiwan Regulator to Inspect Mega Bank’s N.Y., Panama Branches Link
  • NOTE: Mega NY Fine Caused by Branch Exec.’s Rule Unfamiliarity NSN OCCQI56K50XX
Story Link:NSN OCPRNI6TTDSJ
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2886 TT (Mega Financial Holding Co Ltd)

People
Lin Chuan (Taiwan)

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UUID: 7947283