HALISTER1: INSIDE TAIWAN: TWD Gains as Risk Aversion Eases With U.K. Poll

INSIDE TAIWAN: TWD Gains as Risk Aversion Eases With U.K. Poll

(Bloomberg) -- TWD rises along with other emerging market assets, as risk-on sentiment picks up after a poll shows U.K. is more likely to stay in the E.U.
  • TWD gains 0.4% to 32.256 vs dollar, strongest since June 8; bonds decline
  • The currency gains on easing risk concerns because of the poll, says Tieying Ma, economist at DBS
    • Should Brexit materalizes, TWD is buffered by the island’s strong trade surplus, which can offset capital account outflow; Taiwan’s FX reserves is big enough to calm mkt and allows the central bank to defend TWD if necessary
    • Expects CBC to cut benchmark interest rate at the June 30 meeting to boost growth, given weak April & May economic data; delayed rate hike in U.S. is supportive for Asian central banks to lower rates
    • CBC move could lead to capital outflow and pressure on TWD; yr-end target 32.9 vs dollar
  • Yield of 10-yr Taiwan govt bond rises 0.46 bp to 0.7912%, highest since June 8
  • Govt bonds are suppressed given recent U.K. poll, says Star Lai, bond trader at Kgi Securities; expects yield of 10-yr note between 0.75% - 0.85% this week
    • Mkt may be disappointed if CBC doesn’t cut overnight rate
    • The scale of any cut on rates of certificates of deposit, a major income source for banks, will be crucial; decline of less than 7 bps, the scale of the last reduction, could mean the end of rate-cut cycle
  • Overseas investors buy net NT$4.27b ($132.32m) of slocal shares
  • Taiwan May export orders fall 5.8% y/y vs median est of a 7% drop
  • Taiwan Premier Lin appoints Shih Jun-ji as new chairman of Taiwan Stock Exchange
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Star Lai (KGI Securities Co Ltd)
Tieying Ma (Dbs Bank)

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UUID: 7947283

HALISTER1: EU RATES ROUNDUP: Long Duration Bias; Brexit Vote in Focus

EU RATES ROUNDUP: Long Duration Bias; Brexit Vote in Focus

(Bloomberg) -- Analysts continue to lean toward long duration positions, with Citi, RBS, Morgan Stanley all maintaining a bullish bias.
  • Heavy focus on EU referendum; most neutral on peripheral spreads until after vote
  • Barclays (strategists including Guiseppe Maraffino)
    • “Leave” outcome would drive spreads wider, although return to significant moves seen in 2011/2012 crisis seems unlikely
    • Do not see factors that could affect the current resilience of the bund, prefer RV trades
  • Citi (strategists including Harvinder Sian)
    • Continue to expect lower European rates given expected continuation of “super low” inflation prints, technical impact of ECB squeezing bunds, idea that average ECB rate in the next cycle could well be negative
      • See 10Y bunds moving to -15bps on ASW widening, 5y5y nominal rates falling in toward 0.75%
    • Despite QE, periphery spreads can certainly widen if the backdrop is sufficiently negative; volatility likely to remain high next week, 10Y periphery spreads already at 12-mo. wides
      • In a scenario of a leave vote, spreads would likely pierce the 12-mo. wides convincingly, further movement in spreads to be dictated by ensuing policy response
  • Deutsche Bank (strategists including Francis Yared)
    • Several metrics suggest market pricing close to a 50/50 outcome for U.K. referendum, rates market seems to be pricing a little higher odds of a leave
    • In case of leave vote, ECB much more likely to adopt more aggressive liquidity, credit easing measures than cut depo rate
    • Stop out of 5Y BTP/bund spread tightener; maintain BTP 10s30s flatteners, meant as risk-off hedge; maintain paying EUR 5s10s20s, should perform in a vote to leave scenario
    • Hold short March-17 eonia as it is fully pricing a 10bps depo cut, should perform in a remain scenario
    • In U.K., exit 5s10s flatteners vs USD, as performance on an in/out vote are now less clear
  • JPMorgan (strategists including Fabio Bassi)
    • Wide projected ranges based on leave, remain outcomes for EU referendum; 10Y Bunds -15bps to +5bps, German 10s30s 40bps to 60bps, 10Y Italy/Germany 125bps to 185bps
    • Even in case of leave, expect intra-EMU spreads to tighten over time; general risk is fairly well priced
    • Take profit on Brexit hedges via intra-EMU spread wideners as risk/reward is now less attractive
    • For ECB, in case of remain, market should price 25-30% probability of further depo rate cut, in leave scenario highly likely (80% probability) of 10bps cut in the deposit rate
  • Morgan Stanley (strategists including Anton Heese)
    • Recommend staying received in EUR 5y5y rates into referendum this week; valuations more attractive than those seen in April last year
    • With EU referendum too close to call, hold view that there is little point in trading EGB spreads on an outright basis at present
    • Maintain long 30Y BTP vs short 10Y Spain; long-end flatteners continue to offer good risk/reward, trade could perform in both leave and remain scenario
    • Recommend long 5Y Gilts at 0.69%; bond market indicators suggest being tactically long duration due to stronger momentum, signals from the stock market
      • 5Y point offers a compromise between front-end, which would rally most in a stress environment, 10Y which offers best carry and roll
  • RBS (strategists including Giles Gale)
    • Global inflation pressures continue to ease, main supporter for continued yield rallies; reiterate referendum trades, flat periphery, 2x long bunds, long UK 2s, July SONIA
    • U.K 2Y at 0.38% would head to 0% in a leave outcome, and not sell off much at all on a remain outcome
      • Favorite long is 7y5y swaps, captures the peak of the forward curve, optimizes trade-off between the level and roll-down on the curve, target rally to 0.75%, stop at 1.70%
    • In remain outcome, expect strong outperformance for periphery spreads, “knee-jerk” risk-off widening unavoidable in leave outcome, would use this opportunity to enter periphery longs
  • SocGen (strategists including Vincent Chaigneau)
    • Neutral G4 duration ahead of EU referendum, still reluctant to run shorts over summer; would buy dips in a remain scenario as any bond sell-off likely to be short- lived and limited
    • Brexit would see wider spreads, PGB to underperform; Ireland well protected, impact could be favorable, contrarian view
    • DSLs at more risk than OATs, focus shift to “Nexit”, disruption of another EU treaty referendum in Netherlands
    • See value in 5Y OAT, want to position for convergence of 5s10s OAT, bund/OAT 10Y spread; recommend long OAT 04/2021 vs OAT 04/2026 and bund 02/2026 in ASW, target 15bp, stops 37bp
    • 5s10s OAT steepeners should perform in risk-off, bund/OAT tightener is typical in risk on; offers protection in uncertain risk environment
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Anton Heese (Morgan Stanley)
Fabio Bassi (JPMorgan Chase & Co)
Francis Yared (Deutsche Bank AG)
Giles Gale (Royal Bank of Scotland Group PLC)
Giuseppe Maraffino (Barclays PLC)

Topics
BFW EU Rates Analyst Wrap

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UUID: 7947283

HALISTER: Barclays EMEA Head of Credit Restructuring Said to Join KKR Unit

Barclays EMEA Head of Credit Restructuring Said to Join KKR Unit

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
KKR US (KKR & Co LP)
BARC LN (Barclays PLC)

People
George Roberts (KKR & Co LP)
Henry Kravis (KKR & Co LP)
John Davison (KKR & Co LP)

Topics
Who's News - People

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UUID: 7947283

HALISTER: MTN Names Rob Shuter CEO After Settling Record Nigerian Fine (1)

MTN Names Rob Shuter CEO After Settling Record Nigerian Fine (1)

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
MTN SJ (MTN Group Ltd)
VOD LN (Vodafone Group PLC)

People
Robert Shuter (Vodafone Group PLC)
Muhammadu Buhari (Federal Republic of Nigeria)
Peter Takaendesa (Mergence Investment Managers Pty Ltd)
Phuthuma Nhleko (Pembani Group Pty Ltd)
Raymond Sifiso Dabengwa (MTN Group Ltd)

Topics
Who's News - People
Management Changes

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UUID: 7947283

HALISTER1: EU CREDIT DAILY: Referendum Focus; Toyota on Brexit; UAE Banks

EU CREDIT DAILY: Referendum Focus; Toyota on Brexit; UAE Banks

(Bloomberg) -- Market is likely to see continued volatility, with sentiment fragile over the next few days in the run-up to the U.K.’s EU referendum, Bloomberg strategist Simon Ballard writes.
  • Asian equities stronger overnight as latest Oddschecker poll favors “remain” camp; suggests risk assets could be susceptible to a sharp selloff Friday if “leave” wins
    • Highlights global reach of referendum impact
  • Cash bond liquidity may remain low ahead of vote; investors sidelined by uncertainty
    • Most extreme price moves likely in synthetics and equity indexes, buffeted by polls and headline risk
  • Risk Appetite Model highlights fragility in sentiment ahead of referendum
  • CDX IG closed -0.03bps to 82.76 in overnight session; iTraxx Asia Ex Japan IG currently -4.1bps to 143.75
NEWS
  • Corporate News
  • Majestic Wine FY Revenue Beats Est., Trading Conditions Tough
  • Toyota Warns Brexit May Lead to 10% Duties for U.K.-Built Cars
  • Financial News
  • BBVA Launches Plan With Excess Staff in Focus: El Confidencial
  • Facing Slower Growth, U.A.E. Bank Deals May Just Be Starting
  • Abu Dhabi’s NBAD, FGB in Talks to Form Top Bank in Middle East
  • EU Bank Resolution Plan Ignored in Denmark After Bail-In Trauma
  • Credit Rating News
  • Moody’s assigns definitive Aaa rating to Series 9 Tranche 1 of Bank of New Zealand’s Covered Bond Programme
  • Fitch Maintains Kiwibank on Rating Watch Negative
  • S&PGR Says CKHH, CKI, PAH Rtgs Could Withstand Brexit
  • S&PGR Rates QBE Insurance Group Subordinated Notes ’BBB-’
  • Other News
  • Morgan Stanley Says Bet on Bonds Ahead of Vote; Treasuries Fall
  • Abenomics Needs to Be Reloaded as Policy Goals Elusive, Says IMF
  • Brexit Campaigners Are Deceiving Voters, Cameron Says
  • Pimco Sees Asian Credit Insulated From Direct Impact of Brexit
  • Rajan Exit Notice Before Brexit Poses Stress Test for India
ANALYST VIEWS
  • Little else will matter this week but the UK referendum... expect a tetchy week, with markets up or down by small or large amounts depending on the prevailing newsflow around the opinion polls: creditmarketdaily.com
NEW ISSUES
  • No New Issues Friday
  • 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)

Topics
Leveraged Finance

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UUID: 7947283