HALISTER1: RESEARCH ROUNDUP: UST Yield Forecasts Cut Further

RESEARCH ROUNDUP: UST Yield Forecasts Cut Further

(Bloomberg) -- (Updates Barclays, Credit Suisse, JPMorgan in item published July 5.)
  • Most strategists’ end-2016 forecasts for UST 10Y yield now 1.25%-2% vs 2.25%-3% at start of year, when rising inflation expectations and heavy long-maturity credit issuance were expected to dominate
  • Forecasts underwent a round of cuts in Jan. and Feb. based on weak U.S. economic data, poor stock market performance and multi-year low oil prices
  • Latest forecast cuts followed drop to YTD lows, led by U.K. yields to record lows after unexpected vote in favor of exiting EU; UST 10Y and 30Y yields have since also fallen to record lows
  • 10Y yield began 2016 at about 2.25%; at that time, lowest forecasts were from Citi (2.30%) and Deutsche Bank (2.25%); among highest were from Goldman Sachs (3%) and Credit Suisse (2.95%)
  • Barclays
    • 10Y yield forecast lowered to 1.55% on July 7 from 2%; original forecast range 2.1%-2.6%
  • BNP
    • 10Y yield forecast 1.60% since May 26; original forecast 2.75%; MORE
    • Recommended tactical long UST 10Y in April targeting 1.60%; revised target to 1.40% on June 16
  • BofAML
    • 10Y yield forecast cut to 1.50% on June 27; original forecast 2.65%
    • Predicted record low yields during 3Q followed by 4Q rebound; MORE
  • Citi
    • 10Y yield forecast cut to 1.60% on July 1 from 2.05%; original forecast 2.30%; MORE
  • Credit Suisse
    • 10Y yield forecast lowered to 1.40% on July 8 from 2%; original forecast 2.95%; MORE
  • Deutsche Bank
    • 10Y yield will trade around midpoint of 1.25% through 2H, strategists said June 24; original forecast 2.25%
  • Goldman Sachs
    • 10Y yield forecast 2% as of June 27; original forecast 3%; MORE
  • HSBC
    • 10Y yield forecast 1.50%; MORE
  • JPMorgan
    • 10Y yield forecast lowered to 1.55% on July 11 from 1.70%; original forecast 2.75%; MORE
  • Morgan Stanley
    • 10Y yield forecast 1.75% since March 14; will be reviewed soon, strategist Anton Heese said; MORE
  • Nomura
    • 10Y yield forecast cut to 1.75% on July 1; original forecast 2.5%
  • Societe Generale
    • 10Y yield forecast lowered to 1.50% on June 30, with 1.25% likely in 3Q; MORE
  • TD
    • 10Y yield forecast cut to 1.40% on June 24 vs 2.50% original forecast; end-2017 forecast set at 1.90%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Anton Heese (Morgan Stanley)

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HALISTER1: Brazil’s Govt Agenda Favors Mkts; BCB Caution on Rates: Barclays

Brazil’s Govt Agenda Favors Mkts; BCB Caution on Rates: Barclays

(Bloomberg) -- Reform agenda from acting president Temer may help Brazil assets, while the BCB may cut its rate this year at a slower pace than priced by swap market, Bruno Rovai, economist at Barclays, says in a phone interview.
  • “The market is giving a confidence vote in the Temer government,” Rovai says
  • Assets may extend gains after final impeachment vote for suspended president Rousseff, expected at end of Aug.
  • Global market favoring more risky assets also benefit BZ assets
  • While CPI expectations may ease further, leading BCB to start cuts in second half, the pace may be slower then anticipated, Rovai says
  • “The fiscal policy improvement will take time and that will require the real interest rates to stay high for a extended time”
  • Rovai expects BCB to start cutting Selic rate in October, with a -25bps move; rate to close 2016 at 13.75% vs current 14.25%; DI rates prices in ~75bps cut through the 2H16
  • NOTE: DI rates spread has flattened to a record level, following recent BRL gains after new govt pledged to improve fiscal policy and privatizations, along with BCB’s more hawkish tone; see chart of DI spread here
  • NOTE: BRL outperforms most EMFX even with BCB offering reverse swaps; Brazil 5Y CDS breached 300 points, reaching the lowest since July 2015
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Bruno Rovai (Barclays PLC)
Dilma Rousseff (Federative Republic of Brazil)
Ilan Goldfajn (Banco Central do Brasil)
Michel Temer (Federative Republic of Brazil)

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HALISTER: UniCredit Announces Offer of Up to 10% of Bank Pekao

UniCredit Announces Offer of Up to 10% of Bank Pekao

(Bloomberg) -- Milan-based bank said in statement that placement will enable lender to further strengthen its capital position while retaining controlling stake in the company .
  • UniCredit agreed to 90-day lockup period for remaining stake in Pekao.
  • Morgan Stanley, Citigroup, UBS and UniCredit CIB acting as joint bookrunners.
Link to Statement:Link
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
UCG IM (UniCredit SpA)

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UUID: 7947283