Halister News

(Bloomberg) -- BCB rate cut unlikely before the year-end as loose fiscal policy is keeping inflation from slowing, John Welch, analyst at Canadian Imperial Bank of Commerce, says in a e-mail interview.

• Non-tradeable prices such as education, healthcare jumped in the August mid-month CPI released earlier today, which is “not a good signal”
• NOTE: IPCA-15 m/m 0.45% vs est. 0.46% (prior 0.54%)
  • Education 0.90%, healthcare 0.87%, personal expenses 0.85%

(Bloomberg) -- Existing home sales seen declining 1.1% m/m in July to 5.51m annual rate (forecast range 5.4m to 5.7m); based on closings of single-family homes, town homes, condominiums, co-ops.

• In June, sales rose to 5.57m rate, strongest since Feb. 2007

(Bloomberg) -- First week of October 2016 is the potential first date to sell new class of debt French banks can use to meet regulatory requirements, Tomas Kinmonth, fixed income strategist at ABN Amro says in note.

• French law instituting class of senior non-preferred bonds adopted by Senate on July 8 with modifications; must be reconciled with parliament’s version, possibly on Sept. 26
• Capacity of top 4 French banks is EUR93b, BNP Paribas likely to be biggest issuer, under current RWA definitions, may rise significantly under new Basel rules
• Senior non-preferred bonds will have 100% TLAC eligibility
• Top 4 banks have 2019 TLAC shortfall of EUR50b: ABN estimate
  • BNP TLAC shortfall ~EUR26b
  • Other 3 G-SIBS shortfall ~EUR24b
• Subordination to other debt instruments means new class of senior non-preferred won’t qualify for ECB repo operations: ABN
• Senior non-preferred “is set not to be included within the iBoxx Euro Banks Senior universe, for the same reason”
• NOTE: France Can Lead Way on Bank-Failure Loss Rules, Koenig Says (July 8)

(Bloomberg) -- PBOC resuming 14-day reverse repo is to bring “adjustment pressures” on China’s bond market in the near term, as recent rally is built on rapid accumulation of leverage via aggressive short-term borrowing at money market, RBS chief Greater China economist Harrison Hu writes today.

• PBOC is sending out a “prudent policy signal,” and indicating it will defend money market rates at current levels without rate or RRR cuts
• Marginally lifting banks’ weighted average short-term funding costs will force lenders to exit from their leveraged positions
• Low probability of a disruptive adjustment in bond market, given resuming 14-day reverse repo a minor fine-tuning move
• Risk of an overreaction does exist because banks may initiate bond sell-off and/or hoard liquidity to force PBOC to keep easing, as they are addicted to cheap and abundant liquidity
• NOTE: PBOC sells 50b yuan 14-day reverse repo today at 2.4%, first time since Feb. 6
  • Yield of China 5-yr, 10-yr government bonds little changed today at 2.570% and 2.765% respectively

Economic Release Details: {ICBRATE Index ECOD} --GELU SULUGIUC