Halister News

(Bloomberg) -- Twelve gilts that pay coupons go ex-dividend today, with payment due on July 22 for equivalent of 2.8b in cash terms, SocGen strategists including Marc-Henri Thoumin write in client note.

• GBP1.8b of coupons come from the 15Y+ sector, which means the coupons will have a large DV01 equivalent of GBP4.77m per bp
• The coupon payment also stands to lengthen the 15Y+ bucket the most
• Some investors will allocate cash to the market once these bonds have gone ex-dividend
• Indexed investors will want to match the duration lengthening as, on failing to mirror the move, they risk being “short” the market

(Bloomberg) -- Germany to sell new 10Y bund 08/2026 for EU5b at 11:30am CET. Bond expected to outperform on the roll after the auction, though analysts expect a tepid reception at issuance.

• Commerzbank (David Schnautz)
  • 0% coupon makes this the first-ever “10y Bubill”; see scope for some initial weakness in bunds, though firmly expect a sub-0% pricing
  • Previous two launches of 10Y nominal benchmarks were technically uncovered; “tail” of the first auction of 02/2026 was 4c, matching largest one since April 2012
  • Expect auction to be just uncovered, results unlikely to prevent bunds from rallying today

• JPMorgan (strategists including Gianluca Salford)
  • First 10Y German benchmark to be issued with 0% coupon; expect bond to be issued at curve-adjusted discount of 1bp-1.5bp on the roll, equivalent to yield pick-up of about 4bps
  • New bond to outperform modestly after issuance as has been the case in the past six 10Y bund rolls

• Mizuho (strategists including Antoine Bouvet)
  • Fair value for 02/2026-08/2026 roll of +5.5bps in yield terms; previous rolls show that the new benchmark could come at a discount from this level around +6.25bps

Economic Release Details: {CNTSECNY Index ECOD} --JEFF KEARNS

Economic Release Details: {MAOPRATE Index ECOD} --SHAMIM ADAM

Economic Release Details: {CNTSICNY Index ECOD} --JEFF KEARNS

Economic Release Details: {CNTSTCN Index ECOD} --JEFF KEARNS

(Bloomberg) -- GBP credit risk in focus as Theresa May takes over from David Cameron as prime minister today ahead of the anticipated BOE easing tomorrow, with both events helping steady the risk asset ship, Bloomberg strategist Simon Ballard writes.

• Italian financials well underpinned this week on optimism of solutions to balance sheet problems, NPLs; authorities seeking to protect/reassure retail (sub) debt investors
• Asian credit mkts firmer again overnight, may suggest positive opening for EUR corp bond space later
  • But robust demand/supply dynamics still seem founded in assumption of continued accommodative global monetary policy rather that buoyant corp fundamentals
• Risk Appetite Model sees declining volatility and spread dispersion as sentiment recovers
• CDX IG closed -1.3bps at 75.97 in overnight session; iTraxx Asia Ex Japan IG currently -2.2bps at 125.23

NEWS

• Corporate News
• Alstom 1Q Sales Rise 9% Y/y, Maintains 2020 Targets
• Burberry 1Q Retail Sales Beat Estimates
• DKSH 1H Sales, Operating Profit Beat Estimates; Sees Growth
• Capital & Regional 1H LFL Contracted Rent Rises 3.2% Y/y
• Nokia, Samsung Expand Intellectual Property Cross License Pact
• Steinhoff to Buy Rest of Poundland for 220p/Shr Plus 2p Div
• Casino 2Q Sales Beat Ests., French Retail Sales In Line

• Financial News
• Norway’s Largest Bank Beats Retreat From Oil as Losses Mount
• Bank Muscat First-Half Profit Climbs 0.7%; Interest Income Rises
• Natixis Estimates Cut at Mediobanca, Still a L/T Core Holding

• Credit Rating News
• BlackRock Warns Australia at Real Risk of Losing AAA Debt Rating
• Crown BBB Rating Affirmed by S&P, Off Watch Neg; Outlook Stable

• Other News
• Pimco Loads Up on Treasuries as Gundlach to Gross Voice Caution
• Bank Options Priced for Earnings Pain as Brexit Delays Rate Hike
• Reserve Bank of India Braces for Basel Battle on Sovereign Bonds

ANALYST VIEWS

• We see Brexit as having negative implications for the earnings of U.K. banks and those European banks that have substantial exposure to the U.K., but do not see it as a solvency or liquidity event: CreditSights
• Spreads - on an index basis - are still 45bp wider than their historic tight. The ECB’s buying cares, the ongoing demand by fixed income investors in search of yield and the subsequent squeeze on liquidity should see us tighten and flatten as high/low beta risk compresses: creditmarketdaily.com

NEW ISSUES

• Baden-Wuerttemberg EU750m 2Y FRN 6mE -19
• BNP Paribas EU500m 0.75% 11/2022 Tap MS +50
• Commerzbank EU500m 0.5% 6/2026 Cov Tap MS -5
• Cooperatieve Rabobank $300m 5Y Bond MS +95
• Deutsche Bahn EU350m 5Y MS +15
• ESM EU2.5b 0.5% 2026 Tap MS -14, EU2.5b 26Y MS +14
• Muenchener Hypo $600m 3Y Reg S Covered MS +48
• National Bank of Oman $100m 3.125% 10/2019 Tap MS +200
• PerkinElmer EU500m 10Y MS +165
• State Transport Leasing Co. $500m 5YR 5.95%
• 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.