Halister News

(Bloomberg) -- Following last week’s BOE stimulus package, analysts remain bullish on gilts; some focus continues to be on possible adjustments to ECB QE parameters, with changes to capital key now appearing less likely.

• Barclays (strategists including Cagdas Aksu)
  • Latest BOE package has contained bund selloff; still, further spillover risk from JGB market, lower EGB QE displacement in August/September, potential upcoming QE changes in Sept. continue to hold bearish bias in 10Y bunds vs USTs
  • Remain long 7Y FRTR 10/2023 on ASWs; offers good risk/reward into Sept. ECB meeting, considering macro backdrop, potential ECB easing and technical change interventions

• JPMorgan (strategists including Fabio Bassi)
  • Close longs in 3Y Germany and keep 10s30s flatteners, but add 3s5s and 6s8s steepeners as a hedge; market is vulnerable to disappointment to ECB and BOJ on more stimulus, especially in the context of mildly expensive valuations
  • In EGB spreads, tactically add risk to tightening exposure given muted supply outlook, expected stability in data; in periphery, add longs in 8Y Italy vs France, keep longs in 8Y Ireland vs France and 3Y Spain vs Germany
  • In U.K., BOE responded to the weakening in the outlook with a substantial package of measures; hold a bullish bias on 10Y gilts via 2s10s flatteners, maintain tactical 10Y swap spread wideners
    • In vol, stay short 3M2Y gamma and sell Mar. 17 short sterling unhedged straddles

• TD Securities (strategists including Renuka Fernandez)
  • BOE delivered on all fronts; double up on 10y U.S./U.K. spread tightener, continue to hold 2Y received GBP/USD cross-currency basis spreads, Dec. 18/Dec. 19 Short Sterling steepeners

• Citi (strategists including Harvinder Sian)
  • Confidence that next shift in ECB PSPP parameters will be via a lift of the 33% limit on non-CAC bonds increased this week after data that showed no further loosening of capital key and recent comments from Weidmann
  • Skepticism on negative policy has been reinforced by recent comments from BOJ, Carney, Coeure’s bank return data; previously recommended paying 1y1y OIS, now add to this by recommending selling EUR 2Y1Y ATMF receiver for 18bps

• BNP (strategists including Eric Oynoyan)
  • 10Y bund yield likely to remain in -5bps/-20bps range until next ECB meeting; August usually sees a drop in bund yields, but we expect any test of -20bps floor to prove short-lived
  • Japanese investors, French life insurers still good buyers of long-term OATs
    • OAT ASW seasonal patterns suggest a cheapening in second half of August, especially in the OAT 30Y bucket: MORE

• Morgan Stanley (strategists including Anton Heese)
  • Expect U.K. duration to remain well supported, look for 10s30s to flatten, renewed pension fund hedging demand also expected
    • 30Y gilts look attractive vs bunds, with long-end Germany also vulnerable to change in PSPP implementation; recommend being long 12/2046 gilts vs 08/2046 buxl
  • Remaining tactically long 10Y BTP futures vs bunds, reflecting positive seasonals, light supply/high redemptions in Italy, potential reduced demand for long- end bunds once ECB updates QE parameters

(Bloomberg) -- India’s 10-year bond yield may drop to 7%, lowest in seven years, amid rate-cut expectations while cash with banks rise on RBI’s liquidity steps, according to Barclays.

• “There is actual cash with banks, in some cases surplus and in some cases banks will need to borrow much less, which gives them confidence to buy bonds,” says Anindya Das Gupta, Mumbai-based managing director & head of local- markets trading at Barclays
• RBI’s bond purchases have pumped liquidity into the banking system and fixings are now “more in control,” Das Gupta says
• 10-yr bond yield currently trading at 7.18%
• India’s central bank in April pledged to move liquidity closer to neutral from negative
  • Data on Aug. 5 showed that core-banking liquidity rose to 562b rupees ($8.4b) surplus from a deficit of as much as 1.5t rupees earlier in 2016
• Demand for Indian sovereign bonds, which have rallied for six weeks, have also been bolstered by a good monsoon, lower commodity prices, and expectations for a new dovish central bank governor: Das Gupta
• “A rate cut is possible in the next three to six months and the demand-supply dynamics suggest that levels are justifiable and bonds don’t look overpriced,” says Das Gupta
  • 10- to 14-year bond segment looks attractive as it is where most of the market liquidity is, given benign rate view
  • 10-year yield may trade 7%-7.25% for next couple of months
• The GST tax reform bill, which was passed last week, is a sentiment booster though the impact on fiscal deficit and inflation may be less certain: Das Gupta
  • Investors will be looking for stable policies and currency
  • Balance sheets of public-sector banks are a cause of concern for foreign funds, and the govt may need to inject more capital

(Bloomberg) -- Investors seeking to stabilize long-term portfolio returns and/or cash flows to better match minimum income requirements are advised to sell optionality, Commerzbank strategist Markus Koch writes in client note.

• Recommend buying 2.42% single callable note with a 30y term
• Specifically, single call right following 6y lockout period (NC6) adds value to ultra-long notes
  • All considered (maturity, lockouts, funding), analysis suggests that 30y tenor with a 6y lockout appears to be the sweet spot
• EUR vega vols in ultra-long tails is proving resilient despite collapsing IRS

(Bloomberg) -- While not without occasional volatility, global credit spreads have maintained a steady grind tighter in recent weeks as corporate bonds remain the asset class of choice amid anemic growth and low rates, writes Bloomberg strategist Simon Ballard.

• Idiosyncratic event risk firmly in spotlight this week; bonds may experience some price/spread weakness
  • Airbus announced it’s under investigation by U.K. SFO after allegations of bribery and corruption
• Asian credit markets stronger overnight in wake of U.S. NFP report Friday, optimism toward U.S. macro outlook; suggest firm open to EUR credit mkts this morning
• CDX IG closed -2.5bps at 76.12 in overnight session; iTraxx Asia Ex Japan IG currently -3.2bps at 115.24 and iTraxx Australia quoted -3.1bps at 103.94

NEWS

• Corporate News
• Airbus Says U.K. Fraud Office Starts Criminal Bribery Probe
• Air France-KLM July Passenger Traffic Rises 0.5%
• PostNL 2Q Cash Underlying Operating Profit Falls to EU47m
• Woolworths To Relocate David Jones head Office To Melbourne
• Fuji Soft Rises to Two-Month High Ahead of Results
• Brother Industries Reports 1st Qtr Group Earnings Result
• Metro Retail Says 2Q Income Rose to 209.2m Pesos on Higher Rev

• Financial News
• DBS Profit Falls as Swiber Provisions Offset Interest Income
• Raiffeisen Schweiz Interested in Acquiring Private Bank: Finews

• Credit Rating News
• South Korea’s Credit Rating Raised One Level to AA by S&P

• Other News
• Bond Market’s Big Illusion Revealed as U.S. Yields Turn Negative
• Draghi Jumps Brexit Hurdle to Find Oil Damping Inflation Outlook

ANALYST VIEWS

• While (U.S.) output growth is strong now, this growth spurt follows a period of substantial weakness. However, should the August jobs report reflect another month of robust hiring, that could put a Sept. rate hike back on the table: Roubini
• We look at the impact of the Bank of England’s easing measures on sterling credit markets and its potential future relevance to sterling investment grade and high yield: CreditSights

NEW ISSUES

• Vodafone GBP1b 40Y UKT +168
• Barclays HoldCo GBP1.25b 10.5Y UKT +238
• 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) -- Deal is part of Vinci’s expansion strategy in the region, co. says in a statement.

• Co. will buy LAMSAC, which holds the concession for a toll- road in Peruvian capital Lima, and PEX, which is the associated electronic toll-collection operator
• Vinci in April 2015 won contract for international airport in Santiago, Chile.

Link to Statement:Link

(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

• E-Meditek
  • Long-term loan facilities cut to BBB- from BBB at Crisil
  • Cites deterioration in liquidity

• Pitti Laminations
  • LT bank facilities cut to BBB+ from A- at Care
  • Cites significant decline in profitability parameters

UPGRADES

• Arvind
  • LT bank facilities raised to AA- from A+ at Care
  • Cites continuous growth in scale of operations

• GMR Aerospace Engineering
  • Term loan raised to A+(SO) from BBB+(SO) at ICRA
  • Cites corp. guarantee by GMR Hyderabad International Airport

• Green Woods Palaces
  • LT bank facilities raised to BBB from BBB- at Care
  • Cites successful commissioning of hotel project

• Plant Lipids
  • LT loan facilities raised to AA- from A+ at Crisil
  • Cites healthy mkt position

• Thangamayil Jewellery
  • Fund based facilities raised to BBB- from BB+ at ICRA
  • Cites improvement in liquidity position