Halister News

Economic Release Details: {SPCS20Y% Index ECOD} --BRENDAN MURRAY

(Bloomberg) -- Recent performance of EUR financial credit indexes suggests Brexit is being perceived as a Europe-wide problem rather than U.K.-specific, Bloomberg strategist Simon Ballard writes.

• Financial credit spreads may be the key barometer both for systemic risk concerns and bank-specific credit metric issues
• iTraxx Senior Financial index -6.3bps (at 129.18bps) at the time of writing, having touched ~136bps yday, the widest since February 8
  • Worst performers in senior bank debt since Friday include DB (+28bps), CMZB (+16bps), Lloyds (+15bps), Barclays (+15bps)
  • iTraxx Subordinated Financial index currently 270.10bps (-3.4bp vs yday close); ~314bp YTD wide reached Feb. 16
• Gyrations in iTraxx Sub Fins index may reflect changes in perceived measure of systemic risk; a liquid gauge of broad mkt sentiment
• iTraxx Senior Fins index may more closely represent changes in bank-specific fundamentals; currently seen as highly correlated to outlook for possible BOE rate cut in wake of Brexit, which would hit banks’ net interest margins
• In cash bonds, AT1 and CoCo debt prices are recouping some of recent losses this morning; Deutsche 6% 2049 CoCo +1.6 pts at EU79.17 at time of writing, but still down from ~EU84.4 last Thursday
  • Risk/yield characteristics of AT1/CoCo asset classes may make them better indicator of broad risk-mkt sentiment than bank-specific fundamentals; tend to be among first financial assets to react to swings in risk appetite

• 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) -- Jose Sergio Gabrielli, CEO from July 2005 to February 2012, said in court papers Tuesday he wasn’t part of kickback scheme involving other employees of state-owned Petroleo Brasileiro SA who extracted bribes on construction projects.

• Petrobras is center of the country’s biggest corruption and money-laundering scandal, which spread to the nation’s largest construction and engineering companies

• Plaintiffs, led by a Liverpool, England-based pension fund, sued dozens of ex-employees in federal court in New York claiming scandal helped knock tens of billions of dollars off Petrobras’s market value

• They also accused executives of issuing misleading financial statements and overstating quality of internal controls

• Gabrielli says that after months of evidence-collecting, “plaintiffs have failed to identify any admissible evidence suporting their claim” that he should be held liable

• Gabrielli and others who were sued asked U.S. District Judge Jed Rakoff to dismiss the case against them

• Petrobras says case should be thrown out because company was a victim of a plot run by contractors and rogue politicians with help from a few corrupt employees, and cash traded for political favors was stolen from company

• The case is In re Petrobras Securities Litigation, 14- cv-09662, U.S. District Court, Southern District of New York (Manhattan).

(Bloomberg) -- Revised gross domestic product seen at +1.0% annual rate in 1Q vs prior +0.8% (forecast range +0.8% to +1.2%); data track value of all goods and services produced in U.S.

• Today’s report is final of three estimates for qtr; prior 1Q tally weakest since first 3 mos. of 2015

(Bloomberg) -- Recent decline in 10Y TIPS breakeven rates has seen strategists at RBS and Citi turn bullish; some focus on upcoming month-end extensions.

• RBS recommends long 10Y TIPS breakevens at 1.37%, target 1.60%, according to a client note; rationale is a cleaner expression of Fed-on-hold trade, added at this level due to substantial pullback from the highs
  • Citi also favors long 10Y TIPS breakevens: MORE
• JPMorgan says 10Y yields touched an all-time low of 1.38% in July 2012, which will define the rich end of a new medium- term range, strategists write
  • However, vulnerable equity market setup elevates the risk for a blow-off to lower yields in coming days: JPM
• Month-end flows may begin to drive price action in coming sessions; Barclays U.S. Aggregate to extend by 0.08 years
  • Expect a major roll from month-end flows later this week, like buying the backup in yields; in addition, there’s a long weekend ahead, Seaport Global’s Tom Digaloma writes in a client note
• Technicals:
  • Resistance: 133-18 (June 28 overnight high);
  • Support: 132-28 (June 27 low); 132-20+/24 (Opening gap June 24/27)

(Bloomberg) -- Settlement with U.S. filed in Calif. court.

• NOTE: Yday, Volkswagen’s U.S. Tab Said to Grow to $15b in Emissions Scandal