Halister News

(Bloomberg) -- Pimco is seeking to “tilt our alignment to cheaper credit where we can find it,” as yields on 10Y USTs dropped further than anticipated, Luke Spajic, head of portfolio management for emerging Asia, says in a Hong Kong briefing for reporters.

• Potentially attractive credits include “high yield when it gets cheap or emerging markets or some high-quality investment-grade credits”
• Short-dated HY credit and “high quality” Chinese SOEs are among Pimco’s overweights in the corporate credit sector
  • Also favors selected Indian corporates, Korean quasi- sovereigns, and some Chinese private companies, such as technology- and Internet-related firms
• In financials, Singaporean Tier 2 names, some Tier 2 Chinese bank credits, senior Indian bank debt
• In HY, preferences include Indian and Philippine bonds, as well as some non-property investments in China
• Indonesia, Sri Lanka, and probably names like Mongolia are among sovereign picks
  • Not planning on going long South Korea or Philippines sovereigns given current spread levels

(Bloomberg) -- Anglo American falls as much as 8%, leading decliners on the Stoxx 600 Basic Resources index, down 1.9% at 9:10am in London; worst performing sector on the Stoxx Europe 600 index.

• Co. says 2Q Kumba iron-ore production fell 15%
• Cuts full-year copper target on bad weather

CITI (sell)

• Co.’s 2Q production results were “mostly lower than our expectations,”
  • Sees low single-digit percentage downgrades to consensus earnings ests. for 2016; remains concerned about long- term outlook for co.
  • Says co. remains hamstrung by the debt incurred on previous poor capital management, is a forced seller of assets at a low point in the commodity cycle

CANACCORD (sell)

• Co. 2Q production below est., but maintained its production guidance for the year across most commodities, except copper
• Co. 2Q result a slight negative near term, but remains confident co. will hit its guidance across most commodities

BERNSTEIN (outperform)

• Co. results were slightly disappointing on the iron ore and

copper front, though were more positive in PGMs and nickel, with some positive signs in diamonds

• Specific issues at Kumba Iron Ore contributed to production coming in below est., including heavy rainfall causing a safety stoppage
• Copper was also adversely affected by extreme weather at Los Bronces, with unseasonal snowfall causing much lower grades to be mined
• Diamond output fell as expected, in-line with the plan to reduce output in response to market conditions
• Execution of the restructuring effort and disposals process remain key to the investment case

INVESTEC (sell)

• Co.’s y/y declines in output a largely a function of adjusting production profile for tougher environment
• Impact to consensus numbers should be relatively minor

• NOTE: Of 28 analyst ratings, 3 are buys, 8 holds and 17 sells, with an average PT of 641.9p implying ~16% downside

(Bloomberg) -- U.K. to sell GBP1.5b 4.25% 09/2039 at 11:30am CET: analysts see demand fueled by drive for QE trades, as the sector stands to be largest beneficiary of potential BOE QE.

• Citi (Saumesh Dutta)
  • First long-end auction since June 7; high bid/cover ration at recent 2060 mini-tender may reflect “pent-up demand”
  • Like overweighting the 15-20Y area, given this sector tends to be a beneficiary in case QE resumes; 2039 have cheapened on 2025-2039-2052 fly over past year
  • The auction bond has also cheapened on the curve vs neighboring securities offering value
  • 09/2039s has outperformed vs swaps over the past 3 months, but is still cheap compared to the lows of 2015

• RBS (Simon Peck)
  • Outright yield is ~10bps above early July lows, expect RV demand for this issue
  • Continue to see 15-20Y sector as largest beneficiary of QE, despite slightly longer maturity, 23Y bond should perform in tandem
  • Recommend using the auction as an opportunity to buy the bond on 2034/2039/2045 fly, enter at 12bps, target 6bps, stop at 14bps

• Santander (Adam Dent)
  • Outstanding size in bond is still relatively small with a large holding by the APF
  • Supply dynamics favorable for gilts, with coupons and light nominal sales ahead; sector has benefited from QE expectations that are likely to persist, even if it takes time
  • Gilts closer to 20Y maturities have performed even better, which “we would fade via ASW”; recommends buying 2039s as an ASW box vs 2036s, entering at 10bps, target 8bps, stop at 11bps