HALISTER1: United Kingdom of Great Britain and Northern Ireland - DBRS Rating Report

United Kingdom of Great Britain and Northern Ireland - DBRS Rating Report

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

Tickers
6152Z LN (United Kingdom of Great Britain and Northern Ireland)

People
Fergus McCormick (DBRS Inc)
Adriana Alvarado (DBRS Inc)

Topics
Fixed Income Research
Credit Analysis Research
Credit Research
Investment Research
Issuer Focused Research

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UUID: 7947283

HALISTER1: European Union - DBRS Rating Report

European Union - DBRS Rating Report

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

Tickers
345300Z BB (European Union)

People
Carlo Capuano (DBRS Inc)
Fergus McCormick (DBRS Inc)

Topics
Fixed Income Research
Credit Analysis Research
Credit Research
Investment Research
Issuer Focused Research

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UUID: 7947283

HALISTER1: UST 10Y End-2016 Forecast Cut to 1.40%, Credit Suisse Says

UST 10Y End-2016 Forecast Cut to 1.40%, Credit Suisse Says

(Bloomberg) -- Forecast lowered from 2% based on factors that have pushed many G-10 yields to record lows in recent weeks, Credit Suisse strategists led by Praveen Korapaty say in note.
  • Factors include:
    • Strong foreign demand, heightened by negative yields for growing share of G-10 sovereign debt
    • Productivity growth as proxy for real neutral rate
    • Available supply, i.e. marketable UST debt available to price-sensitive, non-official sector accounts
    • Medium-term inflation expectations
  • Yields should remain near record lows through 3Q -- with 10Y falling to 1.2%, 30Y to 1.9% -- then increase modestly in 4Q, 30Y to 2.10%
  • 2Y yield should end year around 0.6%, rise to 0.9% by mid-2017 as market prices in higher odds of Fed action
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Praveen Korapaty (Credit Suisse Group AG)

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UUID: 7947283

HALISTER1: European Investment Fund - DBRS Rating Report

European Investment Fund - DBRS Rating Report

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

Tickers
654429Z LX (European Investment Bank)

People
Fergus McCormick (DBRS Inc)
Javier Rouillet (DBRS Inc)

Topics
Fixed Income Research
Prov., Reg. Credit Research
Credit Analysis Research
Credit Research
Investment Research

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UUID: 7947283

HALISTER1: Brazil’s Temer Support for Meirelles Helps BRL Rise: Analysts

Brazil’s Temer Support for Meirelles Helps BRL Rise: Analysts

(Bloomberg) -- Gains in Brazilian assets reflect decision by acting president Temer to announce a narrower fiscal deficit target for 2017, along with absence of BCB in the FX market and bellow-est. CPI, analysts say.
  • NOTE: BRL +1.9% at 3.3055; currency slightly pared gains after BCB’s Goldfajn said the bank halted auctions while assessing market conditions
  • “Less negative” than anticipated budget gap for 2017 shows that government ended up endorsing Finance Minister Meirelles’ team decision for more austerity, Jankiel Santos, chief economist at Haitong Securities, says in a phone interview
  • NOTE: Brazil to target budget gap of BRL139b next year, vs BRL170.5b in 2016, Meirelles said yday
  • While the government’s plan to reach the target still lacks details, the number was a “victory‘‘ for the economic team, Zeina Latif, chief-economist at XP Investimentos, says
  • ‘‘It’s actually about the realistic aspect of it,’’ Sacha Tihanyi, a senior EM strategist at TD Securities, says
    • ‘‘First of all, the ’whisper number’ was worse, so the government set up an opportunity to surprise the market positively. Also, it appears to be a realistic target, which the government can potentially outperform should Brazil’s recovery be moderately better”
  • BRL also gains today after BCB failed to offer FX reverse swaps for 1st time since July 1; BCB suggests it isn’t defending a specific level for BRL, Haitong’s Santos says
    • DI rates also drop after June CPI reinforced signal that inflation is accommodating; BCB may start cuts at Aug. 31 meeting, when the policy will be focusing on 2017 target
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Henrique Meirelles (Brazil Secretaria do Tesouro National)
Ilan Goldfajn (Banco Central do Brasil)
Jankiel Santos (BES Securities do Brasil SA CCVM)
Michel Temer (Federative Republic of Brazil)
Sacha Tihanyi (TD Securities USA LLC)

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UUID: 7947283

HALISTER1: No Light at End of Tunnel for Global Yield Declines: Analysis

No Light at End of Tunnel for Global Yield Declines: Analysis

(Bloomberg) -- Rates volatility skew shows bond yields in Europe and the U.S. could decline from record lows; deep out-of-money swaptions remain flat, indicating no turnaround is imminent, Bloomberg strategist Tanvir Sandhu writes.
  • During last year’s bund tantrum, the spread between OTM payer and receiver vols proved to be a leading indicator of where bond yields are headed
    • The spread ticked lower before the yields reversed course from near zero during that period, described by Bill Gross as “short of a lifetime”
    • See chart here for spread against EUR 1y10y 100bp OTM receiver vol vs 1y10y 100bp OTM payer vol and 10Y swap rate
BUND SCARCITY
  • In Europe, scarcity of bunds eligible for QE purchases are driving yields further down amid the disinflationary backdrop
    • German bonds maturing up to and including May 2024 yield less than ECB’s deposit rate of -40bps, disqualifying them for purchases
  • Short-tail EUR gamma may be boosted in anticipation of ECB revisions to QE parameters, which is required for the ECB to extend purchases beyond current end-date of March 2017
    • Inflation markets show very little inflation risk premia with forward inflation swaps showing ECB inflation target of 2% may not be reached even in 50 years
  • Tweak to ECB QE parameters will be necessary as bund curve pushes further negative, closing in on 33% issue limit
  • Imminent move away from the capital key toward market- weighted purchases is unlikely as could face political opposition in core countries
U.S. RATES
  • Steepening positions on the swaptions grid may accelerate on dovish Fed repricing; click here for spreadsheet showing change of normalized swaption implied vols (bp/day)
  • See chart here for spread against USD 1y10y 100bp OTM receiver vol vs 1y10y 100bp OTM payer vol and 10Y swap rate
  • U.S. OIS curve currently assigns 29% probability of 25bps rate increase in March 2017 vs 79% on U.K. EU referendum vote; EUR, GBP and JPY OIS curves pricing rate cuts over the next few months
    • Although June NFP at 287k was higher than expected, repricing in yield immediately after couldn’t hold as 2- mo. average is just 149k and 6-mo. 172k
  • U.S. 2y fwd 1m rate has fallen ~24bps since the Brexit result retracing more than 61.8% from the post ’taper tantrum’ highs of 2013
  • NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
William Gross (Janus Capital Management LLC)

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UUID: 7947283