HALISTER1: EUR Credit Market Seen on Backfoot as Volatility Looms: Analysis

EUR Credit Market Seen on Backfoot as Volatility Looms: Analysis

(Bloomberg) -- As European credit markets adopt a more cautious tone amid increased political and macro uncertainty, our Risk Appetite model is pointing to more volatility ahead; current investment trends favoring non-financial, low-beta, short duration assets look set to remain in vogue, Bloomberg strategist Simon Ballard writes.
  • Current Risk Appetite model reading suggests investor sentiment of ~6-7 on a risk scale of 1 (bullish) to 10 (absolute risk aversion)
    • Model now seems to be tracking 2010 data during sovereign debt selloff; may indicate further possible rise in volatility
    • But ECB CSPP should continue to offer a degree of support for credit market; non-financial IG risk to outperform, but crowding out may lift broader market
  • Risk Appetite model still well off the extreme risk aversion (volatility/spread dispersion) levels registered in previous crisis periods of 2007, 2008/2009, 2010 and 2012
    • At the same time, the gauge is also notably weaker vs prior strong risk-on periods of 2005/2006, 04/2015 (bottom-left corner of chart)
  • As the post-EU referendum risk rally fades and macroeconomic consequences of Brexit begin to manifest themselves, any near-term deterioration in credit-market conditions may fuel increased defensive investor sentiment, re-weaken RA model
    • Bias toward short-dated, low beta IG risk; EUR credit likely favored over GBP risk (CSPP over Brexit)
    • Negative market factors include withdrawal freeze on seven U.K. property funds, fears over Italian bank capital levels, high NPLs, insufficient capital buffers
    • Second-round effects may focus on banking-sector exposure to property fund weakness, counterparty credit risk in derivatives trading
  • Capital structure curves may steepen as defensive investors favor senior over higher-risk sub-debt exposure; core EUR banks may outperform perceived weakness in peripheral financial risk
    • In non-financial corporate sectors investor bias for well- rated (IG), low-beta risk; investors may look to avoid U.K. export, housing, cyclical risk exposure
  • NOTE: Model resembles outline of U.K.; south-west corner represents ‘risk-on’ territory of low volatility and low spread dispersion, north east conveys risk aversion
  • 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.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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UUID: 7947283

HALISTER: BOE After Brexit, JPMorgan: Week Ahead July 9-16 (Correct)

BOE After Brexit, JPMorgan: Week Ahead July 9-16 (Correct)

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
JPM US (JPMorgan Chase & Co)
AMC US (AMC Entertainment Holdings Inc)
AA US (Alcoa Inc)
AAPL US (Apple Inc)
13598Z US (Federal Reserve System)

People
Alejandro Garcia Padilla (Commonwealth of Puerto Rico)
Alexander Van Der Bellen (Republic of Austria)
Alexei Ulyukayev (Russian Federation)
Alexis Tsipras (Hellenic Republic)
Andrzej Duda (Republic of Poland)

Topics
El Nino

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UUID: 7947283

HALISTER: Dare to Dream: The Deals That Could Help Fix the Banks (Correct)

Dare to Dream: The Deals That Could Help Fix the Banks (Correct)

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
JPM US (JPMorgan Chase & Co)
GLE FP (Societe Generale SA)
SAN SM (Banco Santander SA)
BARC LN (Barclays PLC)
CSGN VX (Credit Suisse Group AG)

People
Ana Botin (Banco Santander SA)
Christopher Wheeler (Atlantic Equities LLP)
James Dimon (JPMorgan Chase & Co)
James Staley (Barclays PLC)
Jean Pierre Mustier (Tikehau Capital Partners SAS)

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UUID: 7947283

HALISTER1: EU CREDIT DAILY: All Eyes on NFP; Telstra Cuts, China Auto Sales

EU CREDIT DAILY: All Eyes on NFP; Telstra Cuts, China Auto Sales

(Bloomberg) -- Corporate credit saw tightening bias yesterday amid more optimistic global markets, with the pound recovering slightly and equities rallying. However, EUR risk assets could see renewed consolidation today before the U.S. jobs report, Bloomberg strategist Simon Ballard writes.
  • Asian credit markets turned lower overnight; U.S. Treasuries strengthened in the wake of persistent macro concerns and after deadly shootings in Dallas
  • Credit spreads continue to gyrate on macro headlines, even as possibility of a Fed rate move seen limited in the context of Brexit, global macro weakness
    • European credit market volumes may be muted this morning before NFP
  • Risk Appetite Model shows spreads and volatility resuming firm tone
  • CDX IG closed +0.3bps at 81.82 in overnight session; iTraxx Asia Ex Japan IG currently -0.9bps at 138.99
NEWS
  • Corporate News
  • China Auto Sales Growth Accelerates on Rising SUV Demand
  • LG Electronics 2Q Oper. Profit 584.6b Won; Est. 627.7b Won
  • Huaneng Renewables Sees First-Half Profit Rise as Costs Fall
  • Fabege 2Q Rental Income, Profit Increases
  • Mongolian Mining Seeks Debt Moratorium as It Outlines Winding Up
  • Telstra to Cut 326 Jobs, AAP Reports
  • Financial News
  • Monte Paschi Seeks to Deal With EU10B Bad Loans in 2 Wks: Sole
  • Nomura’s Asia Execution Chief Watanabe to Leave After 27 Years
  • Dare to Dream: The Bank Mergers That Could Help Fix the Industry
  • Credit Rating News
  • S&PGR Rpt: Global Economy Darkens Japan 2016 Midyear Corp Otlk
  • Fitch Affirms Tokio Marine & Nichido at IFS ’A+’; Negative
  • S&PGR Afrms Rtgs On HSBC’s Asia Insurance Units; Otlk Stable
  • Other News
  • Amid U.K. Commercial Property Crisis, Bank Exposure Tops GBP65b
  • U.K. Has Worst June LFL Sales in Over Decade on Brexit, BDO Says
  • Snipers Kill Four Policemen in Dallas at Black-Deaths Protest
ANALYST VIEWS
  • Market impact of Brexit-related news flow will start to subside next week. Primary markets seem to have been caught up in the brouhaha, but only when the market reaction elsewhere is extreme: creditmarketdaily.com
NEW ISSUES
  • Hessen EU375m 0.375% 3/2023 Tap MS -12
  • Nykredit Realkredit EU500m 5Y SRN MS +98
  • 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.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
TLS AU (Telstra Corp Ltd)

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UUID: 7947283

HALISTER: Airbus Is Running Out of Buyers for Its Enormous A380s

Airbus Is Running Out of Buyers for Its Enormous A380s

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
AIR FP (Airbus Group SE)
1000Z UH (Emirates Airline)
BA US (Boeing Co/The)

People
Thomas Enders (Airbus Group SE)
Timothy Clark (Emirates Airline)
Zafar Khan (Societe Generale SA)

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UUID: 7947283

HALISTER: Amid U.K. Commercial Property Crisis, Bank Exposure Tops GBP65b

Amid U.K. Commercial Property Crisis, Bank Exposure Tops GBP65b

(Bloomberg) -- U.K. banks have total commercial real estate exposure that is almost a third of the lenders’ combined market value as property funds freeze withdrawals in the wake of Britain’s vote to leave the EU.
  • U.K. major banks’ total commercial real estate exposure is at least GBP65b, according to the 2015 annual reports of RBS, Lloyds, Santander U.K., Barclays and an estimate from Bernstein for HSBC
  • Bloomberg Intelligence analyst Jonathan Tyce says as investors brace for mark-downs of up to 20% on some of those exposures banks will have to take charges that further damp profit and slow capital build
EXPOSURES:
  • RBS
    • Royal Bank of Scotland says ~70% of exposure to U.K. real estate is to commercial
      • Total of investment & development exposure to commercial & residential real estate in U.K. at end 2015 was GBP25.2b
      • Of that GBP17.3b was commercial investment & development
      • Residential development & investment exposure GBP7.9b
      • RBS’s CRE & Residential exposure is 62% of tangible shareholders equity, BI says
    • Annual report here
  • LLOYDS:
    • Lloyds says 70% of loans and advances to U.K. real estate related to commercial real estate
      • Total at end-2015 was GBP18.1b (so 70% is GBP12.7b)
      • Lloyds CRE & Residential exposure is 49% of TSE
    • Annual report here
  • SANTANDER U.K:
    • Santander U.K. total committed exposure to U.K. CRE at end 2015 is GBP10.5b
      • GBP876m of that exposure dates from before 2009
      • Santander U.K. CRE & Residential exposure is 99% of TSE
    • Annual report here
  • BARCLAYS:
    • Barclays exposure to U.K. commercial real estate at end 2015 is GBP11.6b
      • Barclays CRE & Residential exposure is 23% of TSE
    • Annual report here
  • HSBC:
    • HSBC total gross loans and advances to European commercial real estate is $26.3b at end 2015 is ~39% of total global CRE loans and advances of $67.9b
      • HSBC says portfolio is globally diversified with “larger concentrations” in U.K., Hong Kong, U.S. and Canada
      • Bernstein says in note HSBC’s U.K. CRE exposure is below, but close to GBP15b
      • HSBC’s European CRE & Residential exposure is 20% TSE
    • Annual report here
      • Annual report gives only total European exposure, says much of European exposure is in U.K.
RELATED
  • De Montfort report showed U.K. banks cut value of defaulted commercial-property loans on their books to ~GBP12.1 at end 2015
  • Bernstein says Lloyds, RBS’s U.K. CRE exposure is mostly pre-crisis
  • BofAML says buy Aberdeen after CRE concerns hurt asset managers
  • SocGen says RBS most exposed to U.K. commercial real estate
  • JPMorgan says RBS, Lloyds more exposed to property risks than peers
  • Before Brexit vote, Bernstein said house price bubble may burst, hurt U.K. banks
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
SAN SM (Banco Santander SA)
LLOY LN (Lloyds Banking Group PLC)
BARC LN (Barclays PLC)
HSBA LN (HSBC Holdings PLC)
RBS LN (Royal Bank of Scotland Group PLC)

Topics
Key Comm. Real Estate News

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UUID: 7947283

HALISTER1: INSIDE ASIA: NZD, AUD Advance on Less Dovish RBNZ; Yen Gains

INSIDE ASIA: NZD, AUD Advance on Less Dovish RBNZ; Yen Gains

(Bloomberg) -- Kiwi and Aussie lead gains in the region as investors bet the central banks won’t ease further in the near term, while other Asian currencies decline ahead of the U.S. job data release.
  • RBNZ will probably hold cash rate at 2.25% next month due to housing market boom, ANZ says; probability of RBNZ cutting rate in August has dropped to 40.3%, from 65% yesterday
    • Both Australia and New Zealand have housing booms that restrict further monetary expansion, says Andy Ji, FX strategist at CBA; Aussie may find support at 0.75 in coming weeks as RBA likely to follow tone of RBNZ’s Spencer yesterday
    • Australia sovereign bond yield rises 2 bps to 1.894%, yield in New Zealand up 4 bps to 2.284%; 10-year Treasury yield steady at 1.3782%
    • NZD gains 0.6% to 0.7270, while Aussie rises 0.3% to 0.7502
  • Yen gains
    • If U.S. non-farm payrolls top expectations, USD/JPY could rise; however, it may be capped at around 102 level, says Kuniyuki Hirai, NY-based head of trading at MUFG Union Bank
    • Japanese government is vigilantly watching financial markets, and esp. foreign exchange markets, Vice Finance Minister for International Affairs Masatsugu Asakawa says
  • If tonight’s U.S. non-farm payroll data comes in stronger- than expected, market may price in Dec. rate hike, with near-term rate hike seen off the table: Stephen Innes, senior trader at Oanda
  • Yuan drops amid speculation that China will ease
    • USD/CNH seeing broad-based buying in the morning as some investors bet that China will lower RRR after today’s market close, according to FX traders in North Asia.
    • Can’t rule out lending & deposit rate cuts if 2Q economic data disappoint, Shanghai Securities News commentary by NDRC researchers says
    • Rising FX reserves in June may suggest that PBOC isn’t intervening, according to Securities Times commentary
  • Won heads for biggest weekly decline vs dollar in 7 weeks
    • CBA closes its long KRW/INR one-mo. NDF trade initiated at 0.05760 (FX spot reference) with target of 0.05900
  • Southeast Asian currencies mixed; MYR, PHP drop while SGD, THB little changed
  • Peso heads for weekly loss as risk-off sentiment sweeps Asia, with local equities seeing its first net outflow since June 28
    • Uncertainty over Fed, crude prices, yuan and developments in Europe potentially pose downside risks to ringgit: HSBC
  • Morgan Stanley looks to close long USD/SGD trade, according to July 7 note, saying expectation of further monetary accommodation has led to global hunt for yield
    • BOT’s increased intervention probably won’t be sufficient to stem baht strength indefinitely, Credit Suisse wrote in a quarterly note; continues to see a good chance that the BOT will cut its policy rate 25bps to 1.25% by the end of this year
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Andy Ji (Commonwealth Bank of Australia)
Kuniyuki Hirai (Bank of Tokyo-Mitsubishi UFJ Ltd/The)
Stephen Innes (OANDA Corp)

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UUID: 7947283

HALISTER1: INDIA RATINGS: Godawari Power Cut; DTL Ancillaries Raised

INDIA RATINGS: Godawari Power Cut; DTL Ancillaries Raised

(Bloomberg) -- Here’s a roundup of Indian co. debt-rating changes.
  • To get this story sent to your inbox real-time, run NI INRATINGS , click on Display & Edit, then Set Alert Delivery
DOWNGRADES
  • AGC Networks
    • Long-term bank facilities cut to BB from BBB- at Care
    • Cites subdued operational performance, deterioration in capital structure and debt coverage metrics
  • Godawari Power
    • LT bank facilities cut to BBB+ from A at Care
    • Cites subdued operational, financial performance
UPGRADES
  • DTL Ancillaries
    • LT loan facilities raised to B+ from B at Crisil
    • Cites improvement in liquidity due to better-than- expected operating performance
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
GODPI IN (Godawari Power and Ispat Ltd)
AGC IN (AGC Networks Ltd)
9541898Z IN (DTL Ancillaries Ltd)

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UUID: 7947283