Halister News

(Bloomberg) -- U.K. to tap 4.25% 12/2055 for GBP1.25b at 11:30am CET, first supply since BOE QE resumed on Aug. 4.

• Analysts see value in RV; auction expected to be well- received, though some concerns linger given low outright yield levels, large amount of duration

• Citi (Saumesh Dutta)
  • Recent rally in gilt yields led by long-end; increased gilt purchases by BOE has turned net cash requirement for gilts to negative for upcoming months in 2016, except in November
  • In RV, the bond has cheapened on the domestic curve over past month as seen on 01/2045-12/2055-07/2065 fly; also evident evident in spread to 07/2052s

• JPMorgan (Francis Diamond)
  • Expect strong demand at the auction based on RV considerations, QE reverse auction dynamic
  • Yesterday’s 15Y+ BOE buyback provided investors with opportunity to set up for the auction
  • In RV, the gilt looks cheap on the curve; 07/2052-12/2055-01/2060 butterfly sits at around cheapest levels since April 2012
  • Current valuations will further support investor demand at the auction

• RBC (Peter Schaffrik)
  • Amount of risk being auctioned to the market is “a lot”, equivalent of approximately 55,160 gilt futures, around one third of the daily trading volume
  • Irrespective of RV considerations, gilt yields are extremely low and appear to have found a bottom; that should discourage investors going into the auction or cause some kind of concession
  • Continue to see gilts as expensive among core govt bonds which we consider rich as a group as well; in ASW terms, the bond appears as the richest in the vicinity
  • Auction likely to be well placed, recommend being wary of price moves around auction times which could be quite sizable

(Bloomberg) -- Global credit mkts are cognizant that the timing of any Fed rate move over the coming months will likely require all macroeconomic stars to be aligned. Speculation about possible Fed tightening is not yet having any meaningful negative impact on corp credit valuations, but it could soon damp equity mkt sentiment and generic risk appetite, Bloomberg strategist Simon Ballard writes.

• US HY credit remains firmly anchored, now flirting with a 500bp OAS; traded as wide as 873bps on Feb 11 2016
  • EUR HY index similarly robust; currently quoted 330bps mid vs. 598bps Feb wide
• Risk appetite remains buoyed by Goldilocks perception of sustained low (positive) economic growth and interest rates
  • But investors need to maintain strong fundamental vigilance; S&PGR expects U.S. corp speculative-grade default rate to rise to 5.3% by March 17 from 3.8% in March 16 and 1.8% in March 15; EUR rate to rise to 1.8% by end June 2017 from 1.6% year earlier

• Risk Appetite Model looks solid as a rock
• CDX IG closed +0.2bps at 76.65 in overnight session; iTraxx Asia Ex Japan IG currently +0.1bps at 114.76 and iTraxx Australia quoted +0.4bps at 103.08

NEWS

• Corporate News
• Carlsberg 1H Organic Rev. Beats Ests., Keeps 2016 Outlook
• Cathay Pacific Drops Most in a Year After 1H Profit Misses Est.
• Peab 2Q Net Sales Beat Estimates; Order Intake Rises
• Hyundai Says It’s in Talks About Further Partnership With Google
• Bouygues Telecom Renegotiaties 35-Hour Week: Le Figaro
• Finnair Sees Slower FY Rev. Growth; Launches EU20m Savings Plan
• Laura Ashley 74-Weeks LFL Retail Sales up 4.1%

• Financial News
• ABN Amro Says 2Q Net Profit Impacted by Derivatives Provision
• Delta Lloyd Swings to 1H Net Profit, Gross Written Premiums Dip
• Admiral 1H Pretax Rises, Interim Div. Raised
• Industrial Plan for Monte Paschi Seen by Mid-September: Sole
• Credit Suisse Joins War for Quants, Hiring Rothman to Build Team
• QBE Cuts 2016 GWP Forecast Amid ANZ Pricing Drop; Misses Ests.

• Credit Rating News
• Australia Aaa Rating Affirmed, Outlook Stays Stable: Moody’s
• China Credit Growth Shows Rising Leverage: Fitch
• Possible Intouch Purchase May Threaten Singtel’s Ratings: Fitch

• Other News
• Tudor Said to Cut 15% of Workforce After Withdrawals, Losses
• Bank CoCos Seen Stronger on EU Proposal for Coupon Protection
• Global Central Banks Help Send Asian Bond Costs to Decade Low

ANALYST VIEWS

• Although corporate bond yields have tightened considerably relative to Treasury yields in recent months, corporate yield spreads still remain remarkably wide by historic standards .... (and) could still tighten considerably further yet in this recovery: Wells Fargo

NEW ISSUES

• NRW Bank $1b 5Y MS +39
• Intercontinental Hotels GBP350m 10Y UKT +155
• 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) -- Yield on Singapore’s 10-year govt bonds rises 6 bps to 1.75%, set to snap three days of decline; 5-year yield gains 3 bps to 1.30%.

• Light selling by fund managers was seen today after hawkish comments by Fed’s Dudley, according to an Asia-based trader
• 2.125% June 2026 bond is most actively traded, with volume of SGD60m as of 11:39am local time
• SGD 5-year interest-rate swaps climb 4.5 bps to 1.6500%, snapping six-day falling streak
• NOTE: Singapore’s exports plunged the most in four months as orders from China, Indonesia and the U.S. dropped

(Bloomberg) -- South Korea’s won underperforms Asian peers as Bloomberg’s dollar index rises from weakest level in almost two months, buoyed by hawkish comments from Fed speakers overnight.

• “Asian currencies are falling today on the dollar move,” Dwyfor Evans, says macro strategist at State Street Global Markets. “However, looking at the economic data, the Fed can afford to wait on rate hikes.”
• Singapore dollar drops after weaker-than-expected exports; island’s non-oil domestic July shipments fell 10.6% y/y vs est. -2.5%, marking the biggest decline since March
  • “I’d thought the MAS would stay on hold in October, but the risk of a downward re-centering is rising, considering the GDP forecast revision last week, weakness in exports and sluggish consumption,” says Hirofumi Suzuki, economist at Sumitomo Mitsui Banking
  • Singapore dollar is still strong and continues to hit exports, Suzuki says
• Yuan falls despite PBOC strengthening daily reference rate to highest since June 24
  • USD/CNH gains on leveraged buying ahead of speech by Fed’s Bullard post-mkt Asia, says a trader
• Shenzhen-Hong Kong stock connect announcement yesterday indicates authorities are less worried about capital outflows, which is supportive for yuan stability, says Standard Chartered Bank Asia FX strategist Eddie Cheung
• Yen snaps three-day gain against dollar
  • Japan may be limited in its ability to cap yen strength through intervention because of a 10t yen threshold defined as unfair policy by the U.S. Treasury, says Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank
• Korea’s sovereign bond yield curve steepens after govt said it would sell about 1t won ($909b) of 50-year bonds as soon as Sept.
• Aussie falls against greenback
  • Recent AUD/USD triple top may be breached if tomorrow’s jobs data can survive rotational sampling to beat estimates; see analysis here
• Kiwi halts two-day gain against dollar; New Zealand 2Q unemployment rate at 5.1% vs est. 5.3%, though govt cautions that strength in jobs data may be overstated
• Baht retreats after yesterday rising to strongest level since July 2015
  • BOT Assistant Governor Chantavarn said yesterday that currency’s strength is a short-term obstacle for businesses
  • Central bank saw need to preserve policy space on rates, according to minutes of Aug. 3 meeting
• Peso drops for first time in four days after BSP Governor Tetangco said yesterday central bank may cut reserve requirement ratio in next 10 months

(Bloomberg) -- A below-forecast result for Philippines 2Q GDP growth may trigger USD/PHP to climb toward 200-DMA level of 46.948 in the near term, Bloomberg strategist Andrew Robinson writes.

• 2Q GDP probably expanded 6.6% y/y after a revised 6.8% growth in 1Q, median est. in Bloomberg survey shows
  • Ests. range from 5.2% to 7.2%; data due tomorrow at 10am local time
  • This would mark the first quarter of slower growth since 1Q 2015
• Philippines today revises 1Q 2016 growth down to +6.8% y/y from +6.9% at prior reading, on adjustments to trade, other services and public administration, defense data
• ING says widening trade deficit is evidence of strong domestic spending and forecasts 2Q growth of 7.1%, according to note today
• USD/PHP rises 0.4% to 46.420 today, is down 1.5% so far this year; FX pair has not traded above 200-DMA since Aug. 8
  • FX pair’s slow stochastics %K line turns higher to 10, is on verge of crossing above %D line
• NOTE: Andrew Robinson is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

(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

• Prakash Oils
  • Cash credit cut to BB from BB+ at ICRA
  • Cites deterioration in company’s financial profile as reflected by operating income decline

UPGRADES

• Himachal Wire Industries
  • Long-term rating raised to BB from BB- at Crisil
  • Cites expected improvement in company’s financial risk profile, particularly liquidity, driven by higher net cash accrual and absence of debt-repayment obligations

(Bloomberg) -- It is misleading to think Japanese investors are buying more Treasuries even as data from Japan’s Ministry of Finance show increased purchases of U.S. sovereign bonds. A cross-reference check with U.S. TIC data reveals quite the opposite.

• Net buying of U.S. sovereign bonds that include govt, govt agency and local govt debt rose to 1.52t yen ($15.1b) on a 10-month moving average basis in June, near a record high, according to Japan’s MOF data
  • Click here for chart
• While MOF data don’t break down the purchases, U.S. Treasury’s June TIC report on Aug. 15 reveals that the Japanese are in fact buying U.S. govt agency bond
  • Latest TIC report shows Japanese investors’ net purchases of such securities have been on the rise since 2013, reaching $6.1b in June on a 10-month moving average basis
  • Japanese investors have been net sellers of Treasuries since Jan. 2015 on the same basis
• Japan’s biggest life insurers, including Nippon Life and Dai-ichi Life, have said they prefer U.S. mortgage debt to Treasuries on rising hedging costs
• Mortgage-backed securities issued by Government National Mortgage Association offer a spread of 89 bps vs govt bonds, according to BofAML index
• Treasuries are no longer an option for yen investors who need to hedge the Japanese currency’s move, says Kazuya Sugiura, CEO of PineBridge Investments Japan
  • Ginnie Mae bonds are among the top choices for these investors as the securities are guaranteed by the U.S. govt and are thus the closest alternative to Treasuries
• NOTE: Agencies bonds include those from U.S. govt agencies and corporations, as well as federally-sponsored enterprises, such as the Federal National Mortgage Association

(Bloomberg) -- Recent AUD/USD triple top may be breached if tomorrow’s jobs data can survive rotational sampling to beat estimates, Bloomberg strategist Michael G. Wilson writes.

• The last of two large increases to the 8-month sample set will rotate out of the employment-change data that’s released Thursday at 11:30am Sydney time
  • October 2015 headlined at 58.6k and was revised down to 46.9k
  • November 2015 came in at 71.4k, revised next month to 73.1k
• NAB senior economist David de Garis, who’s the top-ranked forecaster of Australia’s unemployment rate, says this could affect the end result by up to 20k jobs
• NAB’s forecast of 12k added jobs and unemployment rate of 5.8% include provision for this factor: De Garis
• Median est. in Bloomberg survey is 10k added jobs in July, after +7.9k in June, based on poll of 26 economists; range: -20k to +30k; unemployment rate is seen holding at 5.8%
• AUD/USD is steady at 0.7695
• NOTE: Michael G. Wilson is an FX strategist who writes for First Word. The observations he makes are his own.