HALISTER1: ‘Bond Shock’ Remains Key Autumn Risk for Markets: BofA

‘Bond Shock’ Remains Key Autumn Risk for Markets: BofA

(Bloomberg) -- “Bond shock” remains key risk amid signs of a cyclical pick-up in inflation, BofA strategists Michael Hartnett, Brian Leung and Jared Woodard write in Aug. 24 note.
  • Maintain “cynically bullish” position on financial asset prices; recommend buying volatility as risk assets are up 15%-20% since Feb. and Sept. is a big “policy month”
  • Risk of hawkish Fed/stronger macroeconomic combination is rising; recommend adding to USD, value, banks/cyclicals, EAFE index equities and reducing duration
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Brian Leung (Bank of America Corp)
Jared Woodard (Bank of America Corp)
Michael Hartnett (Bank of America Corp)

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UUID: 7947283

HALISTER1: Fed ‘Should, Can and Will’ Modestly Overshoot 2% Target: BofAML

Fed ‘Should, Can and Will’ Modestly Overshoot 2% Target: BofAML

(Bloomberg) -- Fed’s 2% inflation target made sense when adopted in 2007, yet is “too low now” due to volatile business cycle, greater risk of deflation, and drop in natural real fed funds rate, BofAML economist Ethan Harris wrote in note Wed.
  • In addition, “perceived probability” of hitting zero lower bound “is much higher”
  • Fed would likely want to overshoot 2% in this cycle because inflation expectations are starting to slip, policy makers need more ammunition to deal with next global crisis, and inflation may need to go above 2% when economy is “hot” in order to average 2%
  • “One could quibble with each of these arguments,” yet BofAML sees “strong case for overshooting or raising the target”
    • Changing target creates “big political and credibility challenges for the Fed”; “a temporary overshoot would be much easier”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Ethan Harris (Bank of America Corp)

Topics
BGOV Finance

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UUID: 7947283

HALISTER1: Yellen Probably Won’t Say ‘Something Actionable,’ FTN Says

Yellen Probably Won’t Say ‘Something Actionable,’ FTN Says

(Bloomberg) -- Odds that Yellen says something “actionable beyond what’s already in the market” on Fri. are “35/65”; odds that mkt finds something to trade on immediately anyway: “98/2,” FTN strategist Jim Vogel writes.
  • Many investors can either wait until prices reflect her speech in the context of next wk’s data or “lean hard against any sharp reactions” to her comments
  • “The more we spend time on scenarios for the next 18 months,” the further the Fed “drops down the list of priorities”; “global yields largely agree”
    • Even so, traders can’t allow positions to deteriorate on 30% chance Fed produces “a large enough surprise” to tilt playing field for next 6 mos.; that concern, along with “desperate need for any trading edge to close out 2016,” will bring volatility for at least next 2 trading sessions
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Janet Yellen (Federal Reserve System)
Jim Vogel (Ftn Financial)

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UUID: 7947283

HALISTER1: BRL More Focused on Fed Rates, Reforms, Than Impeachment: CA

BRL More Focused on Fed Rates, Reforms, Than Impeachment: CA

(Bloomberg) -- Brazil FX market is focused on U.S. Fed Jackson Hole symposium and local government reforms, Vladimir Caramaschi, chief strategist at Credit Agricole Indosuez, says in a phone interview.
  • “The investor is not prepared for a hawkish stance from Fed,” Caramaschi says
  • “While the approval of the DRU was a good sign, the market remains concerned about Temer’s government ability to approve the reforms”
  • Concern about impeachment final vote is marginal
    • “In Brazil, there is no doubt that Rousseff will not stay in the presidency”
  • NOTE: BRL leads EMFX with 23% gain this year on expectations of reforms after impeachment and as main global central banks keep rates near record low, favoring a yield seeking move
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Vladimir Caramaschi (Credit Agricole Brasil SA DTVM/Brazil)
Michel Temer (Federative Republic of Brazil)

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UUID: 7947283

HALISTER1: Brazil Rousseff Impeachment Close to Fully Priced In: Goldman

Brazil Rousseff Impeachment Close to Fully Priced In: Goldman

(Bloomberg) -- Impeachment of suspended President Rousseff “should be close to fully priced” from a market standpoint, Alberto Ramos, senior economist at Goldman Sachs, writes in an e-mailed report.
  • Market likely to focus on willingness of Temer to accelerate and deepen fiscal adjustment and the capacity to engage allied base in Congress to his goal
    • “Failure to deliver tangible steps towards fiscal consolidation may trigger adverse market dynamics”
    • Market could react well to end of concessions, approval of amendment that caps primary spending and a “strong social security reform”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Alberto Ramos (Goldman Sachs Group Inc/The)

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UUID: 7947283

HALISTER1: 53 REITs Initiated at BTIG; Further Multiple Expansion Unlikely

53 REITs Initiated at BTIG; Further Multiple Expansion Unlikely

(Bloomberg) -- 53 REITs initiated by BTIG analysts James Sullivan, Michael Gorman and Tom Catherwood, who previously worked on Cowen’s REIT team; 21 rated buy, 32 neutral.
  • Multiple expansion in REITs “very unlikely” with Fed’s “strong indications” that rates will likely rise
  • Earnings ests. have fallen as valuations have risen since start of year; movement in FFO multiples “consistent” with declining 10-yr Treasury yields
    • Investors should be “cautious rather than complacent” about impact of higher S-T rates on valuations; that said, sees increases in S-T rates having “minimal impact” on L-T rates
  • Recommends being “very selective"; industrial sector has ‘‘best fundamentals’’ driven by strong secular demand, and ‘‘A’’ malls still ‘‘very attractive’’
    • Notes that BTIG has no buy-rated hotel REITs, though valuations are ‘‘generally attractive”
  • * Buy-rated REITs and price targets: ARE ($124), AVB ($208), DOC ($25), ESS ($260), ESRT ($24), GGP ($35), HPP ($38), HTA ($37), KIM ($34), KRC ($80), KRG ($35), MAC ($97), MORE ($12.25), OFC ($33), PLD ($60), ROIC ($25), SPG (266), SRC ($15), STOR ($35), TRNO ($30), UDR ($42)
  • Neutral-rated REITs: AKR, BXP, CBL, CLI, CPT, DCT, DDR, DEI, DRE, EGP, EQR, EQY, FRT, HCN, HCP, HIW, HR, HST, LHO, LPT, MAA, MPW, NNN, O, OHI, PEB, PGRE, REG, SBRA, SLG, TCO, VTR
    • NOTE: Earlier, DDR cut to underperform from neutral at BofAML
  • NOTE: Aug. 12, REIT Backdrop Favorable for ‘Foreseeable Future’: Raymond James
  • NOTE: Aug. 11, REITs Underperform; Franklin St. Down Post- Offer; Retail Slips
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
AKR US (Acadia Realty Trust)
ARE US (Alexandria Real Estate Equities Inc)
AVB US (AvalonBay Communities Inc)
BXP US (Boston Properties Inc)
CBL US (CBL & Associates Properties Inc)

People
James Sullivan (Cowen & Co LLC)
Michael Gorman (Cowen Group Inc)
Tom Catherwood (Cowen & Co LLC)

Topics
Key Comm. Real Estate News

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UUID: 7947283