HALISTER1: EuroEco: Big U.K. Fiscal Stimulus Not a Done Deal

EuroEco: Big U.K. Fiscal Stimulus Not a Done Deal

Alert: HALISTER1
Source: BBF (Bloomberg Brief Newsletters)

Tickers
BHP AU (BHP Billiton Ltd)
4068781Z FP (Credit Agricole Groupe)
ACA FP (Credit Agricole SA)

People
Mark Carney (Bank of England/London)
Orlando Green (Credit Agricole SA)
Patrick Honohan (Central Bank of Ireland)

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UUID: 7947283

HALISTER1: Kiwi May Revisit 14-Mo High If Milk Auction, Data Beat: Analysis

Kiwi May Revisit 14-Mo High If Milk Auction, Data Beat: Analysis

(Bloomberg) -- Kiwi may retest last wk’s spike to 14-mo high of 0.7341 in the event of better-than-expected dairy auction as well as 2Q labor and consumer confidence data this week, according to Bloomberg strategist Michael G. Wilson.
  • NZD/USD trades at 0.7228, still above level when RBNZ cut rate by 25bps last Thursday
    • Short-covering following RBNZ’s well-priced in decision sent kiwi spiking to 0.7341 on Aug. 11, highest since May 2015
  • RBNZ’s attempts to stoke tradables inflation may be challenged by this week’s event risks:
    • Milk futures for September 2017 delivery are trading near contract highs ahead of tonight’s dairy auction at 12:00 UTC
      • In cutting rates last week, RBNZ governor Wheeler noted that low dairy prices are depressing incomes in the dairy sector and reducing farm spending and investment; improving dairy backdrop may prompt RBNZ to pause on further easing
  • New Zealand 2Q unemployment rate will rise to 5.3%, up from a downwardly revised 5.2% prior, according to 16 economists surveyed by Bloomberg
    • A lower than est. jobless rate may stoke kiwi strength and help negate the effects of further RBNZ rate cut
  • Jump in Aug. consumer confidence on Thursday to test 121.4 year’s high would be testament to consumer resilience as the worst of Brexit fallout may have passed
    • Net 61% of consumers expect house prices to rise in next 12 months from 50% in previous ASB Bank household survey
  • NOTE: Michael G. Wilson is an FX strategist who writes for Bloomberg. The observations he makes are his own.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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UUID: 7947283

HALISTER1: Here’s Why a Rally in Chinese Sovereign Debt Will Extend: Pictet

Here’s Why a Rally in Chinese Sovereign Debt Will Extend: Pictet

(Bloomberg) -- Chinese government debt will rally further on risk aversion by domestic money managers and inflows from central banks and global funds into the world’s third-largest bond market, according to Pictet Asset Management.
  • Yields are higher than inflation in an economy that’s not seeing a strong growth rebound, meaning the bonds have “a valuation story to tell,” Cary Yeung, the head of Greater China debt at Pictet, said in an interview
  • Local investors prefer govt. and policy-bank bonds to corporate issuances given concerns over economic growth and defaults, while new rules have limited exposure of wealth- management products to stocks and non-standard credit products, Yeung said
  • NOTE: Benchmark 10-year yield trades at 2.65% today, after reaching record low of 2.64% Monday, down from 3.55% a year ago. Inflation in July fell to 1.8% amid signs that an economic rebound is slowing. The inclusion of China’s yuan into the IMF’s SDR basket in Oct. is expected to spur central banks and fund managers to buy Chinese assets
    • Manulife Asset Management said last month it wants access to China’s interbank bond market, while Fidelity Investment has bought more onshore govt. debt
  • Chinese govt. debt offer relative value vs JGBs and other peers given the global low-yield environment, with some in negative-rate region: Yeung
    • Foreign inflows into China’s bond mkt in June were likely driven by central banks. Portfolio managers would probably follow as they can’t afford to ignore nation’s $8t mkt
    • NOTE: Amount of domestic RMB bonds held by overseas entities rose by 47.7b yuan ($7.2b) in June: PBOC data
    • The inclusion of Chinese govt. debt into global indexes, once it happens, could attract $200b to $400b of inflows, Yeung said, citing market estimates
  • Unless the dollar index surges, yuan will probably remain stable toward yr-end even with a Fed rate hike, Yeung said
    • Yuan declining further would lead to a currency war, and continued expectation of depreciation would also spur capital outflow and raise systemic risk
    • Yuan will be supported ahead of the G-20 summit on Sept. 4-5 and SDR inclusion in short term, and China’s trade surplus in long term
  • NOTE: CNY little changed today at 6.6363 per dollar, falling 2.18% YTD
  • Pictet Asset Management, which owns Chinese government debt, managed $159b of assets worldwide as of end-June
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Cary Yeung (Pictet Asset Management SA)

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UUID: 7947283

HALISTER1: INSIDE ASIA: Won, Yen Lead Rally as Treasury Yields Decline

INSIDE ASIA: Won, Yen Lead Rally as Treasury Yields Decline

(Bloomberg) -- Japanese yen and Korean won lead rally in Asian currencies as Treasury yields decline and traders push back bets on timing for higher Fed rates.
  • FOMC minutes this week are unlikely to convince market participants that Fed is bullish on rate hikes and this will weigh on dollar and support Asian currencies, Masashi Murata, currency strategist at Brown Brothers Harriman says
    • Disappointing U.S. retail sales means it will be hard for Fed to hike rates in Sept.
  • 10-yr Treasury yield falls 2bps to 1.5372% session low in Asia
    • Bloomberg Dollar Index extends overnight losses, drops 0.2% to 1,172.41
  • USD/JPY tumbled 0.9% to 100.35 session low; break below o/n low of 100.87 triggered widespread selling in USD/Asia, traders say
    • Fall in USD/JPY probably accelerated as stops were triggered by short-term players when pair slid below Friday’s and yesterday’s lows of 100.83 and 100.87, according to Bank of America
    • Expect pair to trade in 100-103 range this week before speeches from Fed officials and release of FOMC’s July meeting minutes, says Keisuke Hino, NY-based trader at Mizuho Bank
    • Japanese investors are paying highest hedging costs since 2008 on foreign bond purchases, thwarting efforts by BOJ to spur overseas investment by boosting dollar supplies
    • Ministry of Finance negotiating with country’s major banks to lend to govt at zero interest rate in auctions starting Oct. or Nov., Reuters reported yesterday
  • Aussie govt bonds remain lower after RBA minutes of Aug. 2 meeting says that on balance, prospects for sustainable growth and inflation returning to target over time, would be improved by easing monetary policy
    • AUD/JPY selling seen after RBA minutes brought USD/JPY bids around 100.80 into play, according to an Asia-based FX trader
    • ANZ consumer confidence rises to 117.6 for week ended Aug. 14
  • China’s yuan little changed as PBOC raises yuan reference rate for second day
    • PBOC expects pace of M2 growth y/y to pick up in Aug., Sept.
    • China bond honeymoon may continue on tepid growth: survey
  • Won leads rally among Asian currencies as local markets resume trading after long w/e
    • Korea should continue to allow FX rate to move flexibly: IMF said at conclusion of the Article 4 discussions on Aug. 13
    • Recent increase in minimum wage is unlikely to lead to improvement in workers’ average wages as number of those receiving below minimum income is also rising: BOK
  • Rupiah strengthens for second day
    • Indonesia commits to draft 2017 state budget thoroughly, President Widodo says in annual parliamentary speech
  • Rupee one-month forwards +0.1% at 67.11 after long w/e
    • India’s July wholesale prices est. +2.84% y/y, highest since Aug. 2014, vs June +1.62%
  • Peso at 8-wk high before auction of 7-yr bonds
    • Stronger remittance growth in June is favorable for the peso, ING wrote in Aug. 15 note
  • Ringgit climbs, buoyed by o/n gains in oil prices while bonds rise
    • BNM is inching closer to another rate cut, with buffer against lower 4% limit of official 2016 growth target becoming thinner and thinner, OCBC writes in note today
    • Overall growth will increasingly depend on domestic demand, since export weakness is “chief culprit” of slowdown in GDP growth in 2Q
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Masashi Murata (Brown Brothers Harriman & Co)
Keisuke Hino (Mizuho Financial Group Inc)

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UUID: 7947283

HALISTER1: INDIA RATINGS: Lakshmi Float Glass Cut; Panacea Biotec Raised

INDIA RATINGS: Lakshmi Float Glass Cut; Panacea Biotec Raised

(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
  • Lakshmi Float Glass
    • Long term rating cut to BB+ from BBB- at Crisil
    • Cites expectation that financial risk profile, particularly liquidity, will remain constrained over medium term
  • Manaj Tollway
    • LT rating cut to BBB+(SO) from A-(SO) at Care
    • Cites subdued operating performance in FY16 resulting in weakening of debt protection indicators
UPGRADES
  • Goyal Energy & Steel
    • LT rating raised to BB+ from BB at Care
    • Cites improvement in financial performance in FY16 and 1QFY17 successful commissioning of project
  • Panacea Biotec
    • LT rating raised to B+ from B- at Care
    • Cites improved liquidity profile due to relisting of co.’s vaccines by WHO
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
MUTH IN (Muthoot Finance Ltd)
PNCB IN (Panacea Biotec Ltd)
ARVND IN (Arvind Ltd)
9770841Z IN (Maxop Engineering Co Pvt Ltd)

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UUID: 7947283

HALISTER1: RBA Due to Release Minutes From August Policy Meeting in 5 Mins

RBA Due to Release Minutes From August Policy Meeting in 5 Mins

(Bloomberg) -- Reserve Bank of Australia releases minutes of its Aug. 2 policy meeting when the central bank cut benchmark rate by 25bps to 1.50% as forecast by 20 of 25 economists.
  • NOTE: Aug. 10 - RBA Governor Stevens says inflation is going to be “pretty low for a while” although negative rates are unlikely
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
40005Z AU (Reserve Bank of Australia)

People
Glenn Stevens (Reserve Bank of Australia)

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UUID: 7947283