HALISTER1: Taiwan’s Mega Fined $180m by N.Y. Over Anti-Money Laundering Law

Taiwan’s Mega Fined $180m by N.Y. Over Anti-Money Laundering Law

(Bloomberg) -- New York State Dept. of Financial Services says Mega International Commercial Bank of Taiwan will pay a $180m penalty and install an independent monitor for violating the state’s anti-money laundering laws.
  • DFS examination found Mega Bank’s head office was “indifferent toward risks associated with transactions involving Panama, recognized as a high-risk jurisdiction for money-laundering”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2886 TT (Mega Financial Holding Co Ltd)

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UUID: 7947283

HALISTER1: Don’t Expect Secular Bear Market in Bonds, BofAML Says

Don’t Expect Secular Bear Market in Bonds, BofAML Says

(Bloomberg) -- Won’t see a secular bear market in bonds; yields may remain at or below current levels in U.S., euro area for remainder of 2016, BofAML strategist Ralf Preusser said in note.
  • Brexit has yet to impact data, ECB expected to announce extension of QE and China expected to “lose momentum”
    • BofAML strategists expect correction in equity markets, while pension liability hedging may support demand for duration in U.S.
  • Too early to be underweight duration as “we haven’t seen the lows in either bund yields or USTs”
    • Not being invested is “often the wrong conclusion” as the U.S. market likely to “outperform on a cross-market basis”
    • “Cash underperforms bond returns even in a secular bear market in rates”
  • BofAML conducted bear market simulation which assumes history “perfectly reverses itself,” where govt bond yields retrace path of last 30 years
  • Results “bury the myth” that rising rate environment would result in “severe losses” for bond investors over multiple decades
    • Returns in simulation “remain decent,” outperform cash, though are lower during the next 30 years than last 30 years; cumulative loss would be limited to -3.4%, total return index bottoming in Feb. 2017, with worst 1-yr return -4.8% vs -4.5% past 30 yrs
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Ralf Preusser (Merrill Lynch International)

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UUID: 7947283

HALISTER1: FOMC in Holding Pattern; Yellen May Echo Williams’s Views: UBS

FOMC in Holding Pattern; Yellen May Echo Williams’s Views: UBS

(Bloomberg) -- Yellen may discuss long-term implications of a lower neutral rate in her Aug. 26 Jackson Hole speech, UBS economists Dave Liang, Drew Matus, and Samuel Coffin write in note.
  • Fed chair should also address recent global developments, data releases, and their influence on policy normalization
  • She may “echo the sentiment” of SF Fed Pres. John Williams, who questioned efficacy of targeting low inflation in a low-rate environment
    • NOTE: In economic letter released Mon., Williams called for steps such as possible higher inflation target or nominal GDP targeting to mitigate impact from lower natural rate of interest
  • Minutes of Fed’s July mtg suggest FOMC is “in a holding pattern”; desire for more “proof of economic life strongly suggests” next rate hike is more likely in Dec. than Sept.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Drew Matus (UBS Asset Management Japan Ltd)
John Williams (Upland Resources Inc)
Samuel Coffin (UBS Global Asset Management Japan Ltd)
David Liang (UBS Securities LLC)

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UUID: 7947283

HALISTER1: Post-Brexit Switch to Search for Yield Faster Than Expected: GS

Post-Brexit Switch to Search for Yield Faster Than Expected: GS

(Bloomberg) -- The velocity of the transition to “search for yield” from “search for safety” after Brexit surpassed expectations, Goldman strategists led by Charles Himmelberg wrote in note.
  • Brexit hastened the search for yield and bolstered the degree of risk tolerance pushing the marginal dollar to seek higher carry because of accommodation by central banks leading to low rates
  • Recommend overweight single-Bs, neutral CCCs and underweight BBs
  • CCCs upgraded to neutral from underweight; despite recent beta underperformance of CCCs, they still offer a strong yield pick-up relative to their own history
  • Also recommend overweight Energy vs Metals & Mining on the view that the lows for base metals are yet to materialize in this cycle, while WTI price forecast for 2H16 is $50/bbl vs the previous forecast of $45
  • Oil market has gone from “nearing storage saturation” to deficit earlier than expected
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Charles Himmelberg (Goldman Sachs Group Inc/The)

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UUID: 7947283

HALISTER1: Markets May Be Overreacting to Jochnick QE Comments, Nordea Says

Markets May Be Overreacting to Jochnick QE Comments, Nordea Says

(Bloomberg) -- While Riksbank’s First Deputy Governor Kerstin af Jochnick said Sweden’s central bank could “technically” buy covered, corporate or municipal bonds, such a move could face obstacles, Nordea analyst Martin Enlund says in emailed comments.
  • Investors may be overreacting to these comments, as they did to comments from Floden on purchases of municipal bonds
    • EUR/SEK has reversed losses in the past hour; now up 0.3% to 9.5006
  • Riksbank buying Kommuninvest bonds is something that has been discussed on and off for quite some time
  • Riksbank can still implement more government QE to cover 1H 2017, so unclear if it needs to broaden buying yet
  • The mention of corporate bonds is new; Riksbank hasn’t previously expressed care about levels at which corporates can fund themselves, so shifting policy now seems at odds with past thinking
    • Earlier QE has mainly been concerned with keeping the SEK at bay, and corporate QE is unlikely to help much with that due to the low volumes involved
  • There’s very limited liquidity in corporate bonds with limited issue sizes, which could make it difficult to buy in any volume
  • Such a program could be become politically sensitive; if operational details include only buying more liquid bonds, it could prompt questions why the government is subsidizing some companies in particular
  • NOTE: Jochnick said would need to calculate the effects on the market; for example, buying corporate bonds would require resources to make credit assessments
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
1083Z SS (Sveriges Riksbank)

People
Kerstin Af Jochnick (Sveriges Riksbank)
Martin Enlund (Nordea Bank AB)

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UUID: 7947283