Halister News

(Bloomberg) -- German June unemployment change est. -5K vs prev -11K.

• German June unemployment rate est. 6.1% vs prev 6.1%

(Bloomberg) -- Italy sell 06/2021 for EU2b-EU2.5b, 06/2026 for EU2-EU2.5b, and CCTeu 07/2023 for EU1.25b-EU1.75b at 11am CET.

• 10Y sector offers value vs peers, 5Y sees less relative value but should benefit from short base among dealers; reduced sizes, stabilization since Brexit outcome also supportive, say analysts

• Commerzbank (Michael Leister)
  • Italy “playing it safe” with EU2b-2.5b ranges for conventional BTPs, among lowest ranges YTD
  • Sharp underperformance vs SPGBs this week, should pave the way for relatively smooth auction

• Mizuho (Antoine Bouvet)
  • Recovery in peripheral sentiment since Brexit referendum should allay any concerns about supply
  • Italy has lagged in this move, perhaps partly due to supply, also more fundamentally the difficulty in recapitalizing banks, political uncertainty
  • 10Y offers the best value, 5s10s looks steep, offer attractive pick-up
  • 5Y bond should be well supported by the specialness on repo, suggesting a short base among dealers

• SocGen (Marc-Henri Thoumin)
  • 10Y BTP has seen good concession vs neighboring bonds, while 5Y sector has been steady on the curve
  • 7s10s Italy looks particularly steep outright and vs SPGBs
  • Both issues offer a good pick-up vs SPGBs, but do not expect a reversal just now, momentum is too buoyant in Spain

• UniCredit (Luca Cazzulani)
  • EU13.4b of redemptions may provide some support; with the worst of post-Brexit shock now passed, significant spread pressure in short term seems unlikely
  • 5Y looks attractive vs 03/2021, ~4bps cheaper; 10Y is attractive vs peers, auction will be the last tap, new 10Y potentially due end of July

(Bloomberg) -- The Brexit polemic may be far from resolved and the outlook for GBP risk mkts anything but clear, but credit mkts are rallying back for now. Investor sentiment is fragile though, due to the extent of uncertainty now embedded into the U.K./EU political and economic landscape, Bloomberg strategist Simon Ballard writes.

• Risk asset mkts benefiting from perception that U.K. ‘Leave’ vote may not necessarily imply full ’Brexit’; very uncertain outlook though as EU calls for prompt triggering of Article 50
  • Corp bond mkt rebounding on idea that any eventual ‘Brexit’ would only take effect after long negotiation process; does not present near-term macro shock risk
  • More cautious investors may view short-term mkt strength as opportunity to take profit / re-set shorts
• ECB CSPP and continued low yield environment also continue to enhance demand dynamics
• Risk Appetite Model shows relative stability in spreads, but with modest pickup in volatility
• CDX IG closed -3.3bps at 81.27 in overnight session; iTraxx Asia Ex Japan IG currently -1.6bps at 141.85

NEWS

• Corporate News
• Monsanto Earnings Disappointment May Help Bayer With Its Bid
• SoftBank Said to Face Inquiry Over Alleged Arora Conflicts
• Gatwick Airport FY Rev Up 5.5% To GBP 673.1m
• Redde Expects FY Results to ‘Slightly Exceed’ Estimates
• Kappahl 3Q Operating Profit, Gross Margin Beat Estimates

• Financial News
• U.S. Banks Beat Fed’s Test as Deutsche Bank, Santander Fail Anew
• UBS’s Murphy and Naylor Leave as Orcel Overhauls Senior Team
• JPMorgan Plans $10.6b Buyback, Maintains Qtr Div. at 48c/Shr
• Goldman Cuts Japan FY16 EPS; Topix Target Implies Limited Return
• UniCredit Narrows CEO Candidate Shortlist to Three: Sole
• Legal & General Retirement Unit Experienced Strong Sales in 1H

• Credit Rating News
• Moody’s downgrades outlook on Singapore’s banking system to negative
• Moody’s places ratings of four Hungarian banks on review for upgrade
• Brexit Has No Direct APAC Sovereigns, Bank Ratings Impact: Fitch

• Other News
• U.K. Bonds Celebrate as Spread to U.S. Widens to 15-Year High
• China’s Analysts Haven’t Been This Wrong on Equities Since 2009
• World’s Riskiest AAA Currency Exposed as Brexit Divides Markets
• Spain Doubles Return for Bond Investors This Year With Rajoy Win

NEW ISSUES

• State of Hessen EU875m 0.375% 7/2026 Tap MS -7
• Molson Coors Brewing EU800m 8Y MS +110
• 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.

(Bloomberg) -- Mixed bag for region’s currencies, with Korean won and Malaysian ringgit leading gains while Aussie and kiwi give up early advance and now lead declines.

• Yuan also falls, with CNY heading for its biggest quarterly loss since 1994, when official and mkt rates were unified
• Yen heading for monthly gain of 7.7%, most since Oct. 2008; eyes quarterly increase of 9.5%, biggest since 4Q 2008
• Recent yuan moves suggests China is resuming gradual yuan depreciation path, which will help anchor Asian currencies, says Brown Brothers Harriman currency strategist Masashi Murata
  • Risk aversion easing as expectations for Fed hike are pushed back; Asian currencies likely steady next week, at least until U.S non-farm payroll data
• Dollar Index edges higher after two days of losses, heads for 1.3% quarterly gain
• Bloomberg JPMorgan Asia Dollar Index in line for 1.6% quarterly drop, which would be biggest since 3Q last year
• MSCI Asia Pacific Index rises 1.1% after 1.8% gain yday; Brent crude falls 0.9%, set to snap two-day rise
• South Korean won leads gains, rising 0.6% following 1.0% gains on both Tuesday and Wednesday; heading for 3.3% increase in June, but a quarterly loss of 0.9%
  • S. Korean industrial production rose 4.3% y/y in May vs +0.3% est.; biggest increase since Jan. 2013; household debt ratio rises, BOK says
  • Central bank has room for rate adjustment: board member Ho
• Ringgit rises 0.5% and is set for 2.7% gain this month; but it is still heading for region’s biggest quarterly slide, down 3.0%
  • Stronger-than-expected gain in Malaysia’s exports in May could see USD/MYR re-testing 3.9893, Bloomberg strategist Andrew Robinson writes; USD/MYR now at 4.0223; exports data due July 1
  • Goldman Sachs now expects rate cut at next BNM meeting
• Onshore and offshore yuan decline, with both headed for monthly loss of 1%; Foreign Ministry spokesman yday said yuan rate isn’t cause of trade imbalance with U.S.
  • ANZ cuts CNY yr-end forecast to 6.75/USD from 6.65; says China likely to tolerate currency weakness as long as no spillover into domestic markets and impact on capital outflow
• Yen edges higher, on course to snap two days of losses
  • BOJ likely to loosen monetary policy at July meeting to slow yen’s gains after Brexit as well as combat falling inflation and slowing economic growth, according to Union Bancaire Privee
  • Overseas investors sold most Japanese bonds and stocks last week since March 2008: Finance Ministry; debt redemption on June 20 may have affected sales, BNP Paribas says
  • May industrial production falls 2.3% m/m vs est. -0.2%; sharp fall suggests economy slowed in 2Q following solid rise in 1Q, according to Capital Economics
  • New BOJ board member Masai to hold press conference 6pm Tokyo time
• Philippine peso steady; down 0.5% vs USD for month; has tendency to weaken in June due to seasonal factors, ANZ says; weakest performance vs NZD, down 5.7%
  • Duterte sworn in as country’s 16th president
  • May bank lending and M3 money supply data due today
• Aussie falls following 2-day rally; heads for first monthly loss since March
  • Australian May credit to business, consumers rises 0.4% m/m vs est. 0.5%; job vacancies -1.9% in May vs +2.8% in April
• Kiwi also snaps 2-day rally, heading for monthly loss of 4.6% and quarterly drop of 2.6%
• Thai baht set to gain 1.4% in June, most since Oct.; data today include May trade and current account balance
• Taiwan dollar strengthens for third day, heads for monthly gain of 1.2%, little changed on-quarter; central bank rate decision due; CBC expected to cut from 1.50% to 1.375%, according to median est. in Bloomberg survey
  • USD/TWD NDFs could eye May high if CBC cuts: analysis

(Bloomberg) -- China’s June manufacturing PMI could put downward pressure on Asian currencies if reading shows contraction following 50.1 figure in May, Bloomberg analysis suggests.

• More central banks are likely to ease monetary policy if PMI is below 50, OCBC Bank economist Tommy Xie says
  • Low reading would have negative impact on Asian FX near term
• PMI due July 1, 9am local time
• Bloomberg JPMorgan Asia Dollar Index has tracked movements in China PMI; see chart for past three years here
• Last time PMI went from 50 or above to contraction m/m was in Aug., when reading was 49.7 vs 50.0 in July; ADXY then fell 0.32% in Sept.
• PMI new orders component, a gauge of Chinese factory demand, also seen moving in line with ADXY, see chart here
• ADXY is down 0.9% since result of Brexit vote Friday
• Median est. in Bloomberg survey for June PMI is 50.0; ests. range from 49.8 to 50.4
  • 8 of 28 economists in survey forecast reading below 50

(Bloomberg) -- A higher-than-expected Indonesia CPI in June may be the catalyst for USD/IDR to re-test the year’s low, Bloomberg strategist Andrew Robinson writes.

• Consumer prices probably rose 3.40% y/y from prev. 3.33%, snapping two months of slower gains, according to median est. in Bloomberg survey; ests. range from 3.27% to 3.90%
  • Data due tomorrow, no time specified; 4 out of last 5 releases were announced just after 11am local time
• BI forecasts June inflation up 0.5%-0.6% m/m, Senior Deputy Governor Adityaswara said on June 28
  • Median est. is for 0.53% m/m gain: Bloomberg survey
• USD/IDR may decline to 12,978 March 7 low and lowest for 2016; pair now up 0.2% at 13,182
  • Pair dropped 1.5% so far this week on expectations Fed may push back any rate increase on Brexit contagion
  • USD/IDR MACD is bearish; below signal and zero lines and dropping
• 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