HALISTER1: USD Rates Vol Spread Near Top of Dovish Fed Pricing: Charts

USD Rates Vol Spread Near Top of Dovish Fed Pricing: Charts

(Bloomberg) -- The steepness of the U.S. interest-rate volatility curve shows dovish Fed pricing near top of two-year range ahead of Jackson Hole summit and Sept. FOMC, underscoring risk of a flattening pullback, Bloomberg strategist Tanvir Sandhu writes.
  • See chart here of 6m10y vs 6m2y swaption normal implied vol spread, against 2y forward 1m rate (inverted), used as a proxy for the terminal rate
  • See 1-year regression analysis here; R^2 at 0.70, y=-10.681x+29.672; investors using the vol spread to hedge any hawkish Fed re-pricing amid upcoming event risks could set off flattening of vol curve
  • U.S. OIS curve currently assigns 43% probability of 25bps rate increase by Dec. 2016 vs 0% 1-month ago
  • U.S. 2y fwd 1m rate at 0.98%, near 50% retracement from the highs seen during the Fed taper tantrum of 2013
  • NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER1: Regulation: Banks Face Expedited EU Anti-Terror Finance Plan

Regulation: Banks Face Expedited EU Anti-Terror Finance Plan

Alert: HALISTER1
Source: BBF (Bloomberg Brief Newsletters)

People
Andrzej Duda (Republic of Poland)
Angela Merkel (Federal Republic of Germany)
Gretchen Bergstresser (CVC Credit Partners LLC)
Jean-Claude Trichet (Group Of Thirty)
Mario Draghi (European Central Bank)

Topics
Proposed Rules
Subordinated Debt

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UUID: 7947283

HALISTER1: BRL Weakens on Temer’s FX Comments; U.S. Data Ease Move: Mizuho

BRL Weakens on Temer’s FX Comments; U.S. Data Ease Move: Mizuho

(Bloomberg) -- Acting President Temer’s comments to Valor, along with below-est. Chinese data, help to weaken BRL, while prospect of continued low rates in the U.S. temper the move, Luciano Rostagno, chief strategist at Banco Mizuho do Brasil, says in a phone interview.
  • Country needs FX to underpin exports as this is the main channel for economic recovery, along with investments, Rostagno says
  • While BCB reverse swaps auctions hold BRL gains, interventions aren’t aimed to push the currency into a weakening trend
  • Weak U.S. data reinforces idea that Fed won’t hike soon, favoring EMFX
  • NOTE: Temer told Valor that Brazil needs a balanced currency
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Luciano Rostagno (Banco Mizuho do Brasil SA)
Michel Temer (Federative Republic of Brazil)

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UUID: 7947283