HALISTER1: JGB Sell Off No Reason for Bund Investors to Be Spooked: RBS

JGB Sell Off No Reason for Bund Investors to Be Spooked: RBS

(Bloomberg) -- The JGB/bund spread is back at low single digit, a level which preceded a sharp selloff in bunds in early 2015 but the ECB backstop means this time is different, RBS analysts say.
  • Repeat -0.40% target for 10Y bunds; with inflation keeping ECB easing in play expect supply/demand dynamics to remain center stage
    • Supply will be dwarfed by QE flows in all markets so favor peripheral spread tighteners
  • NOTE: A jump of ~30bps in JGB yields back to January levels would bring 10Y USTs toward 1.70%-1.75%, UBS says
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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UUID: 7947283

HALISTER1: Sovereign Risk-Weight Regime Shift Worth +30-50BPs in BTPs: Citi

Sovereign Risk-Weight Regime Shift Worth +30-50BPs in BTPs: Citi

(Bloomberg) -- Regime shift of applying risk weights and/or large exposure limits on EGBs is worth between +30bps and +50bps in 10Y BTPs, Citigroup strategists including Micheal Spies write in client note.
  • On the flow effect of regulations, under the most severe regulatory scenario, flat risk weights of 5% can lead to an uptick of EGB yields by nearly 4bps while the implementation of Basel-proposed risk weights could lead to an increase of up to 40bps
  • 25% large exposure limit under the most rigorous capital assumptions could lead to EGB re-allocation of more than EU1t
    • Imposing risk weights and/or large exposure limits fundamentally changes the nature of semi-core and especially peripheral EGBs
    • These instruments become more risky because of lower home bias but also because the ability to restructure debts becomes feasible
    • Regime shift takes these bonds away from true sovereign status toward sub-sovereign or external debt-risk valuations
  • European policymakers are still in the early stages of tackling the thorny topic of risk weights and large exposure limits for sovereign debt
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Michael Spies (Citigroup Inc)

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HALISTER1: Japan 10Y Yield Forms Textbook Hammer Exhaustion Pattern: Charts

Japan 10Y Yield Forms Textbook Hammer Exhaustion Pattern: Charts

(Bloomberg) -- Japan 10Y yield forms hammer exhaustion pattern against 2008 downward channel while long-tern stochastics are slowly turning positive; see monthly chart here.
  • NOTE: Upside risks to JGB yields may ultimately remain capped given elevated USD funding costs and reduced attractiveness of foreign bonds, with current move being a function of positioning; see more here
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER1: TOPLive Starts: Follow Standard Chartered Earnings in Real Time

TOPLive Starts: Follow Standard Chartered Earnings in Real Time

Alert: HALISTER1
Source: BN (Bloomberg News)

Tickers
STAN LN (Standard Chartered PLC)

People
Li Li (Standard Chartered PLC)
Andrew Halford (Standard Chartered PLC)
Chirantan Barua (Sanford C Bernstein & Co Inc)
William Winters (Standard Chartered PLC)

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HALISTER1: India Government Bond Rally May Have Run Its Course, IIFL Says

India Government Bond Rally May Have Run Its Course, IIFL Says

(Bloomberg) -- India’s short-term rates are close to lower bound of RBI’s policy corridor and a further fall in absence of rate cuts is unlikely, Ashutosh Datar and Amit Tiwari, economists at IIFL, write in note.
  • “With inflation close to the upper bound of RBI’s comfort zone, policy rate cut is unlikely in the near-term, implying little or no room for further decline in bond yields from current level,” the economists write
  • NOTE: RBI has a 50 bps policy corridor with reverse repo at lower band of 6% while repo rate is the upper band at 6.5%
  • Spread between 10-year and 3-month govt bonds has widened to 77 bps in July from 71 bps in June, 40 bps low in March: IIFL
    • This is in sync with view that as monetary policy easing comes to a close, markets will increase the term premium built into the yield curve
  • Yield on 7.59% 2026 govt bond rises 4 bps to 7.22%, up 8 bps so far since yday; yield had dropped 28 bps in July
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Amit Tiwari (Iifl Capital Ltd)
Ashutosh Datar (Iifl Capital Ltd)

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