Halister News

Economic Release Details: {CNLNSFIN Index ECOD} --JEFF KEARNS

Economic Release Details: {CNLNNEW Index ECOD} --JEFF KEARNS

--ALESSANDRA MIGLIACCIO

(Bloomberg) -- Extremely low levels in EUR rates are likely to make absolute yields on long-dated callable notes unattractive for investors despite the pickup obtained from selling embedded options, Barclays strategists including Amrut Nashikkar write in a client note.

• Long-dated callable note issuance should hence slow in coming months, though the rise in structured note issuance along with the drop in long-dated vols warrants near-term caution
  • As a result, turn neutral on vega in the bottom right part of the EUR vol surface
• Continue to find mid-expiry vols on the short-to- intermediate tails (up to 10y) to be underpricing uncertainty regarding these forward rates in the medium term
• Payer skew on mid-expiry vols can richen further as rates behave more lognormally with ECB unlikely to cut rates aggressively
• Retain recommendation to sell EUR 2y1y 1x2 payer spreads
• Portions of the top-left part of the USD vol surface remain rich from a fair-value perspective; maintain recommendation to buy USD 6m3y 1x2 payer spreads as a trade that also benefits from a gradual sell-off in front-end USD rates

(Bloomberg) -- “Surprise” corporate earnings’ numbers and reduced seasonal activity are helping to keep cash-credit spreads tighter, but better-than-forecast profit headlines may still be masking weaker revenue growth, Bloomberg strategist Simon Ballard writes.

• Latest Bloomberg data for Euro Stoxx 50 Index shows Q2 earnings “surprise” of +12.7%; but sales growth is running at -6.23%, earnings growth -7.59%
  • Positive earnings headlines owing to lowered expectations, cost-cutting and margin expansion, but no reflection of improving credit fundamentals; may be unsustainable
• Olympic distractions, prospect of European Assumption holiday on Monday, the pinnacle of the summer lull, may damp activity today
  • Underlying bias to cash-bond spreads remains firm though, with risk appetite boosted by earnings headlines and the low global rates outlook

• CDX IG closed +0.3bps at 71.32 in overnight session; iTraxx Asia Ex Japan IG currently +0.1bps at 114.43 and iTraxx Australia quoted -1.0bps at 102.63

NEWS

• Corporate News
• Petrobras Swings to Profit on Rising Crude Output, Exports
• Noble Group Sacrifices Profit in Pursuit of Cash After Loss
• Bauer 1H Rev. Drops, After Tax Loss Widens, Confirms FY Forecast
• Stockmann 2Q Revenue Beats Estimates; Keeps FY Guidance
• Toshiba Turns Profits in Latest 1Q, Raises 1H Forecasts
• Eskom, 3 Unions Reach 2-Year Wage Pact With 8.5%-10% Raises
• Metro Inc 3Q Net Earnings Rise 8% Y/y to C$176.5m
• Maersk 2Q Ebit Beats, Underlying Result Misses; Outlook Kept

• Financial News
• Deutsche Pfandbriefbank 2Q NII Drops, Sees Lower FY Income
• Skandiabanken 2Q Net Jumps After Visa Sale; NII Increases
• Bank BPH 2Q Net 68.9m Zloty vs 5.3m Zloty
• National Bank of Kenya, Family Bank, Bank of Baroda Cut Rates

• Credit Rating News
• S&PGR Places Mitsui Life Insurance Ratings On Watch Positive
• Rio’s Debt Risk Plunge Seen Prompting Rating Outlook Rethink

• Other News
• J.P. Morgan Asset Warns on Inflation as Bond Market Sees Uptick
• German Growth Slows Less Than Forecast as Trade Bolsters Economy

ANALYST VIEWS

• Euro IG issuance bounced back in July but is yet to recapture the pace of its record start to the year, while HY issuance dropped to its lowest level since February: CreditSights

NEW ISSUES

• L-Bank $500m 7/2018 FRN Tap
• Svenska Handelsbanken GBP125m 2.375% 1/2022 Tap UKT +83
• Rhineland-Pfalz EU750m 10Y MS -15
• 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.

--JANA RANDOW

(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

• Tree House Education
  • Long-term bank facilities cut to BB from BBB at Care
  • Cites deterioration in financial performance

UPGRADES

• Blackwood Developers
  • LT loan facilities raised to BBB- from B- at Crisil
  • Expects credit risk profile to improve significantly over the medium term

• Gangetic Hotels
  • LT loan facilities raised to B+ from B- at Crisil
  • Expects continued strong managerial, financial and operational support from Phoenix group

• Soma Isolux Surat Hazira Tollway
  • LT loan facilities raised to C from D at Crisil
  • Cites receipt of commencement date of commercial operations, thereby mitigating project implementation risk

(Bloomberg) -- Dollar rises vs Aussie, kiwi as a slew of Chinese data fails to beat expectations; WTI crude futures extend yesterday’s rally on Saudi talk of market stabilization.

• AUD/USD -0.2% to 0.7685 vs 0.7671-0.7705 range
  • Australian corporates seen selling local currency after release of worse-than-expected China factory output: trader
  • Leveraged selling ahead of data resumed immediately afterward; macro selling layered above 0.7700
• USD/JPY +0.1% to 102.01 vs 101.77-102.21 range
  • Pair rose initially on higher Japanese stocks, then faded as U.S. Treasury yields declined in Tokyo trading
  • Three charts show why dollar hedging costs are rising in Japan
  • Options expiring today include 102.50 strikes for $2.1b
  • Japanese bought net 892b yen of overseas debt last week
• BBDXY +0.1% to 1,178.70
• Treasury 10-year yield down 2 bps to 1.54%
• NZD/USD -0.2% to 0.7198 vs 0.7190-0.7227 range
  • Asst. Gov. McDermott signals RBNZ is likely to wait until Nov. for rate cut
  • N.Z. posted record population increase in year ended June
  • Retail sales surged in 2Q, led by building supplies
• EUR/USD steady at 1.1141 vs 1.1131-1.1144 range
  • Central banks seem to be ruling out negative rates, says CLSA
• GBP/USD +0.1% to 1.2974 vs 1.2950-1.2978 range
  • Gold gains, copper falls