Halister News

(Bloomberg) -- Citi strategists advise staying long on credit into year-end by selling default-swap insurance.

• “Despite stretched valuations and central bank tightening, spreads are likely to remain range bound into year-end,” strategists including New-York-based Anindya Basu say in note. “The gradual pace of Fed balance sheet reduction is unlikely to affect spreads meaningfully, and the considerable carry from long credit should be enough to offset a modest spread widening.”
• Say the best long in CDX IG is to sell payers; for CDX HY, an index long risk position is best
• The Fed will pare its balance sheet by $10b/month, an amount “surely too small to impact asset allocation decisions for investors in the short term,” according to Citi. The pace is seen rising to as much as $50b a month by 3Q 2018

RELATED

• June 14: Forget Bonds, Citi Is Plugging Credit Swaps for Bullish Bets
• Aug. 9: CDS indexes are more liquid than cash bonds, BAML Says

To contact the reporter on this story: Cecile Gutscher in London at cgutscher@bloomberg.net To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Cormac Mullen

(Bloomberg) -- The suspension of the debt limit to only December will probably slow Treasury’s pace of increasing coupon auction sizes to offset the drop in demand from the Fed as it begins to wind down its balance sheet, Wrightson ICAP chief economist Lou Crandall says in a note.

• Wrightson forecasts across-the-board increases of $1b in all coupon auction sizes starting in November
• That is “a slightly less aggressive pattern than in our previous projections, which assumed the Treasury would boost the four monthly notes by a total of $2 billion apiece over the course of November and December, but would increase the 10- and 30-year offerings by only $1 billion for the quarter as a whole”
• 3-month suspension also hinders Treasury from dramatically boosting bill supply in Q4
• Treasury’s August refunding statement anticipating bill sector increases followed by bigger nominal coupon auctions was based on assumption that a “more permanent debt ceiling fix would be in place by autumn,” allowing cash balance to rise to $360b by Dec. 31
  • Year-end cash balance of $200b-$225b “now seems more realistic”

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton

(Bloomberg) -- Judge Ismael Moreno orders proceedings directed against ICBC Europe in money-laundering case, Spanish National Court says in emailed statement Monday.

• Judge says that as well as 7 officials at bank under probe, investigation should also include ICBC as a company to the extent that it knew how bank operated in Spain to gather cash from criminal groups to convert it into other products such as loans, transfer it mostly to China: statement
• NOTE: Spanish Police Arrest Five in ICBC Money-Laundering Probe (2)

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

(Bloomberg) -- Treasury futures (TY1) technical levels in focus.

• Daily trend bias: Neutral to bullish
• Comment: Sustaining downside gap as safety trades unwind; despite this, and while still factoring risk for additional sell pressure, overall uptrend conditions do prevail while above the ichimoku ’slow’ line (baseline) today at 126-29
  • Resistance: 127-12+; 127-17; 127-19+
  • Support: 127.03+/02; 126-29; 126-24
• NOTE: Contract rolls with active futures on GFUT (no adjustments)
• NOTE: Sejul Gokal is a FICC technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Sejul Gokal in London at sgokal1@bloomberg.net

(Bloomberg) -- Swedbank estimates that Swedish CPI and CPIF were unchanged at 2.2% y/y for CPI and 2.4% y/y for CPIF in August, driven by rising housing and service prices, economists Jorgen Kennemar and Ake Gustafsson say in note.

• Estimates that both measures fell by 0.1% m/m
• Says Aug. inflation will be especially interesting after the surprisingly high inflation numbers during the summer, especially in July, when CPIF rose 2.4% y/y
• Inflation figures hard to interpret, since they are affected by several temporary factors
• Biggest wild card is price of package travel, partly because of a new measurement method Statistics Sweden introduced at start of year
• Even excluding package travel, underlying inflation has risen to about 2%
• Riksbank’s latest forecast is about 10 bps below Swedbank’s, which could be because it expects a bigger drop in travel prices
• NOTE: Swedish inflation data for August due on Sept. 12 at 9:30am CET

To contact the reporter on this story: Love Liman in Stockholm at jliman1@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Niklas Magnusson

(Bloomberg) -- PBOC will continue reforming supervision to fight money laundering，terrorist financing, and tax evasion, the central bank says in a statement, citing Deputy Governor Yin Yong comments at a Sept. 8 meeting.

• Statement didn’t say how improvements would be made 
• China faces anti-money laundering challenges as financial risks rise: Yin

To contact Bloomberg News staff for this story: Stephen Tan in Beijing at ztan39@bloomberg.net