HALISTER1: PHILIPPINES PREVIEW: Strong CPI Could Pressure USD/PHP to 50-DMA

PHILIPPINES PREVIEW: Strong CPI Could Pressure USD/PHP to 50-DMA

(Bloomberg) -- USD/PHP could retreat to 50-DMA of 46.653 near-term if inflation rises more than economists expect, Bloomberg strategist Andrew Robinson writes.
  • June CPI forecast to rise 1.8% y/y after 1.6% increase in May, according to median est. in Bloomberg survey; ests. range from 1.5% to 2.0%; data due at 9am local time tomorrow
  • May data stronger than expected for first time in five months; USD/PHP fell 0.3% to 46.110 on June 7, the day of that release
  • USD/PHP down 0.1% at 46.890 today
    • Slow stochastics and Williams %R are both falling
  • BSP cut inflation forecast to 2% for this year from 2.1% previously, Deputy Governor Guinigundo said on June 23
  • NOTE: Andrew Robinson is an FX 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

HALISTER1: AUD/USD May Grind Higher If RBA Leaves Rates Unchanged: Analysis

AUD/USD May Grind Higher If RBA Leaves Rates Unchanged: Analysis

(Bloomberg) -- AUD/USD may edge higher short-term if election results avert a hung parliament and RBA leaves rates unchanged this week, Bloomberg strategist David Finnerty writes.
  • Pair may face some initial pressure early this week given uncertainty over national election result; see election wrap
    • However, investors are becoming accustom to idea of Brexit and are resuming a more risk-on approach in Asia- Pacific currencies
  • AUD/USD’s bearish sentiment was greatly reduced last week as markets further digested U.K.’s decision to leave the EU
    • AUD/USD 1-mo. risk-reversals have dropped to 1.43 vol, puts over calls, from 2.32 vol reached on June 24 when Brexit vote was announced
  • MACD remains bullishly above zero and signal line as FX pair bullishly breaches 100-DMA resistance
  • Investors are pricing a higher probability of a rate cut at August’s meeting, after the next CPI data is released on July 27
    • Pricing for a July rate cut has dropped to 13% from 20% on the day of Brexit referendum on June 23 while probability of an August rate cut has risen to 57% from 37% on June 23
  • RBA is expected to leave its cash rate unchanged at 1.75% on July 5, according to all 27 economists in a Bloomberg survey
  • RBA said at its June meeting that although inflation is below target, holding policy stance unchanged at that meeting would be consistent with sustainable growth in the economy and inflation returning to target over time
    • RBA decision due July 5 at 2:30pm local time
  • AUD/USD currently -0.3% at 0.7465; pair rose 0.4% last wk
  • NOTE: David Finnerty is an FX 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: ‘Dory’ Swims Past ‘Tarzan’ for Third Straight Box-Office Win

‘Dory’ Swims Past ‘Tarzan’ for Third Straight Box-Office Win

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
DIS US (Walt Disney Co/The)
SCOR US (comScore Inc)
CMCSA US (Comcast Corp)
TWX US (Time Warner Inc)

People
Roald Dahl
Steven Spielberg (Dreamworks SKG)

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UUID: 7947283

HALISTER1: Bund Scarcity Boosting 30Y Swaptions as Curve Flattens: Analysis

Bund Scarcity Boosting 30Y Swaptions as Curve Flattens: Analysis

(Bloomberg) -- Bund scarcity is eroding and enhancing returns from EUR rates markets at the same time.
  • While the shrinking pool of bonds Bundesbank can buy has driven the 10s30s curve to the flattest in over a year, squeezing bank margins and forcing pension funds further out the curve, it is also fueling the outperformance of 30Y swaption gamma, Bloomberg strategist Tanvir Sandhu writes
  • NOTE: Levels as of Friday, ~4pm BST
  • Spread between implied volatilities on EUR 3m30y and 3m10y swaptions has widened to 21bp/annual vs ~10bp/annual at the start of the year; the 10s30s curve at 52bps, near flattest since April 2015; see chart here vs bund 10s30s
  • Abundant post-Brexit uncertainty may have shifted EUR rate vol equilibrium higher while top-left gamma will be driven by ECB policy shifts
    • Eonia currently pricing 100% odds of a 10bps ECB deposit rate cut in Dec. vs 54% on U.K.’s EU referendum day, assuming 6.4bps Eonia-depo rate corridor
  • Levels in EUR inflation markets are historically low and reflect little inflation risk premium
    • Forward inflation swaps show ECB inflation target isn’t in sight in the next 50 years
  • Any ECB move to relax QE rules amid the diminishing asset pool could put bund ASW at risk of repricing lower in summer
  • ECB is considering loosening of QE rules to ensure enough debt is available to buy, euro-area officials familiar with discussions said, while Reuters reported any proposal to remove the capital key for allocating QE purchases isn’t currently under discussion
    • Technical changes to ECB QE parameters have been inevitable and is nothing new as bund curve pushes further negative, nearing the 33% issue limit
  • Bund scarcity concerns are most directly expressed in ASW which are inversely correlated to SX7P; see chart here for European bank selloff vs bund ASW widening
    • Negative convexity dynamics is taking hold in the bund market, where the pool of bonds Bundesbank can buy is shrinking and increased purchases of what remains amplifies a bullish flattening of the yield curve
    • That’s squeezing banks margins as existing higher-rate loans mature and new ones are issued at ultra-low rates
    • With funding markets relatively stable and central bank backstops in place, short-term Brexit shock has been contained; however, margin squeeze and weaker euro-area GDP growth with ECB forecast cut by 0.5% pose operating risks for banks
  • As returns get pushed out of curves and pension funds’ funding ratio deteriorates, organizations with large liabilities are being forced to increase their DV01 further out the curve; that’s driving incremental 10s30s flattening and in turn, 30Y gamma may continue to outperform
    • Widening duration gap between liabilities vs assets amid falling yields spurs demand for duration for asset- liability matching
  • 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)

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UUID: 7947283