Halister News

(Bloomberg) -- Brazil market expects that acting president Temer will maintain a firm stance on reforms, overriding the interests of specific sectors, Daniel Weeks, chief-economist at Garde Asset Management, says in a phone interview.

• Besides impeachment, investors focus on measure to cap government spending
• Allegations involving Temer has create discomfort in short term
  • NOTE: Saturday, Odebrecht Linked Temer to Illegal Donation to PMDB Party: Veja
• Report seems similar to other allegations already disclosed; if no fresh details emerge, it’s not concerning for markets, Weeks says

(Bloomberg) -- “The continued flattening of the Treasury yield curve likely puts the Fed in a cautious mood,” Renaissance Macro Research economist Neil Dutta writes in note.

• Fed would probably like to see steeper curve before lifting rates for 2nd time; achieving steeper curve “requires patience” even in face of stronger economic news
• “We lean to one hike this year over two”
• Robust payroll growth in last 2 mos. could simply be “catch-up” after tepid growth in early 2016
  • Underlying payroll growth is likely slowing
• Fed to “take a pass” in Sept. as FOMC’s “dovish core” “holds the line,” opting instead to raise rates in Dec.
  • “No need to rush to the exits” given slow moving inflation
  • Neutral risk assessment could reemerge as a compromise position to bring more hawkish FOMC members along

(Bloomberg) -- U.S. high-yield corporate bonds have become “a bit of a safe haven” despite their sub-investment grade ratings, as the combination of appealing credit spreads and resilience of the world’s largest economy attracts domestic and foreign investors, Michael Collins, senior investment officer at Prudential Fixed Income in Newark, says in interview with Bloomberg Brief.

• Brexit has further buoyed appeal of U.S. high-yield debt to a lot of investors who are reducing exposure to Europe, Collins says in July 29 interview
  • U.S. macro outlook positive for the market in context of struggling developing markets
  • Anemic global economic growth outlook will cap potential for Fed to raise U.S. interest rates; sees perhaps maximum two (25bps) increases over coming year
• Favors exposure to U.S. consumer sectors, notwithstanding broad market susceptibility to oil price volatility
  • Non-commodity sectors look cheap; commodity sectors possibly still a little overvalued
• Within HY, now recommending an up-in-quality bias; crowding out from ECB CSPP into HY space should benefit BB debt
  • Sees value in 7y, 10y BB bonds; spread compression potential
• U.S. HY spreads look fairly valued relative to current 5%-6% running default rate
• A flat earnings outlook could create a tough environment for HY companies, making it more difficult for them to meet debt service obligations
  • May result in slower debt issuance going forward

(Bloomberg) -- BRL underperformance, DI rates increase reflects limited impact of reports that acting president Temer asked for illegal financial help for his fellow party members, analysts say.

• Political reports involving the government may generate “tail wind risks,” affecting the emerging investors confidence in Brazil, Leonardo Monoli, partner-director at Jive Asset Gestao de Recursos, says in a phone interview
  • If the allegations against Temer and his ministers aren’t confirmed and after the suspended president Rousseff’s impeachment is complete, foreign investors may return to local market, pushing BRL to near 3.00/USD
• Allegations against Temer is unlikely to change the score of Rousseff impeachment vote, Paulo Petrassi, FI manager at Leme Investimentos, says
  • Without the reports on Temer, DI could drop today, reflecting the bellow est. IGP-DI inflation index and CPI outlook improvement shown by BCB survey