HALISTER: U.K.’s Sun Sets on Brussels in Endorsement Seen as Bellwether

U.K.’s Sun Sets on Brussels in Endorsement Seen as Bellwether

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
NWSA US (News Corp)

People
Keith Murdoch (Twenty-First Century Fox Inc)
Anthony Blair (United Kingdom of Great Britain and Northern Ireland)
David Cameron (United Kingdom of Great Britain and Northern Ireland)
Jacques Delors (Autorite des Marches Financiers)
John Major (Credit Suisse Group AG)

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UUID: 7947283

(2) *FCC’S NET NEUTRALITY RULES UPHELD BY COURT OF APPEALS

*FCC’S NET NEUTRALITY RULES UPHELD BY COURT OF APPEALS

--JON MORGAN
Alerts: HALISTER, HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
T US (AT&T Inc)
GOOG US (Alphabet Inc)
CMCSA US (Comcast Corp)
MSFT US (Microsoft Corp)
VZ US (Verizon Communications Inc)

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UUID: 7947283

HALISTER1: Brazil Spending Cap, Developments on Lula Buoy BRL: Quantitas

Brazil Spending Cap, Developments on Lula Buoy BRL: Quantitas

(Bloomberg) -- BRL reversed losses as reports showed that Finance Minister Meirelles seeks a spending cap for longer than previously expected term to stabilize the debt, Eduardo Longo, FI and multi-markets trading manager at Quantitas Gestao de Recursos says in a phone interview.
  • Other reports signaling that proceedings against former president Lula may have a faster outcome than previously expected, reducing political uncertainty, also help to overshadow impact of concerns about Brexit
  • NOTE: Top Court yday decided to send investigation of Lula back to lower court judge Sergio Moro; that means the process may be resolved before 2018 elections, reducing chances for the former president and Rousseff ally to come back to power, Longo says
    • New BCB governor Goldfajn may start cutting rates in Oct.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Eduardo Longo (Quantitas Gestao de Recursos SA)
Henrique Meirelles (Brazil Secretaria do Tesouro National)
Luiz Inacio Da Silva (Federative Republic of Brazil)
Sergio Moro (Federative Republic of Brazil)

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UUID: 7947283

HALISTER: Brexit Risk Rises as Axa Chief Sees Probability ‘Extremely High’

Brexit Risk Rises as Axa Chief Sees Probability ‘Extremely High’

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
CS FP (AXA SA)

People
David Cameron (United Kingdom of Great Britain and Northern Ireland)
Henri Castries (AXA SA)
Alan Johnson ((UK)Parliament)
Gordon Brown (International Monetary Fund)
Graham Sharpe (William Hill PLC)

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UUID: 7947283

HALISTER1: Bund Call Skew Steepens on Brexit, Bond-Scarcity Risks: Analysis

Bund Call Skew Steepens on Brexit, Bond-Scarcity Risks: Analysis

(Bloomberg) -- Steepening of bund volatility skew in favor of calls reflects increasing Brexit risk premiums and investors positioning for increased bond scarcity (see chart here), Bloomberg strategist Tanvir Sandhu writes.
  • USTs, bunds and gilts remain well-supported into the U.K. vote on EU membership as “leave” poll gyrations increase and downside risks are far too large on being wrong
  • Pool of bonds Bundesbank can buy is shrinking and increased buying of what remains amplifies bullish flattening
  • EUR swap spreads set to extend widening trend as bund scarcity concerns are most directly expressed in ASW
  • As pension funds’ funding ratio deteriorates, increased receiving interest is most likely at the long end of swap curves
  • As returns get squeezed out of curves, pension funds and insurers with large liabilities are being forced to increase their DV01 further out the curve
  • Widening duration gap between liabilities vs assets amid falling yields spurs demand for duration for asset-liability matching
  • Yields on German bonds maturing up to and including Jan. 2022 are now below ECB’s deposit rate of -40bps, making them ineligible for purchases
    • With ECB running out of German paper, they will either have to change the depo rate or issue limit restrictions
  • German supply set to turn strongly net negative (adjusted for QE) over summer, which will further weigh on yields; average maturity of assets purchased under QE has been increasing, adding support to long-dated paper: see here
  • Downside options may come into play where a vote to “remain”, in line with betting odds, will see an unwind of Brexit premiums in bunds and renewed Fed hawkishness weighing on global bonds
  • Bund futures contract may ultimately approach roll gap at ~166 before ~168, corresponding to yield of ~-20bp, as mentioned here and here in April
  • Comparison of July skew today vs 5 days ago:
    • 25d skew at 0.57 vs -0.23
    • 15d skew at 0.93 vs -0.31
    • 10d skew at 1.22 vs -0.33
  • 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)

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UUID: 7947283