HALISTER1: UST MORNING CALL: 10Y Enters Resistance Band Amid G4 Yield Slide

UST MORNING CALL: 10Y Enters Resistance Band Amid G4 Yield Slide

(Bloomberg) -- Treasuries extending weekly advance, with 10Y and 30Y yields below YTD low closing levels and approaching YTD intraday lows, led by JGB, U.K. and German yield declines to record lows; strategic focus is on resistance levels where yield declines may stall.
  • UST 10Y faces “fairly strong resistance” at 1.64%, break of which suggests a move to 1.61%, BMO strategist Aaron Kohli says in note
  • 1st standard deviation of 2016 bull trend channel is 1.625%, and case can be made for next resistance at 1.59%, FTN strategist Jim Vogel says in note
  • On a break by 10Y yield below 1.65%, “we have little, really nothing, until 1.60+%,” midway point of Feb. 11 selloff, then that day’s low of 1.53%, CRT strategist David Ader says in note
  • 10Y yield has entered cheap end of 1.62%-1.65% resistance band; near-term tone positive under tactical support at 1.695%-1.745%, JPM strategists Jay Barry and Jason Hunter say in note
    • Don’t fade initial move toward 1.60%; however, consider establishing short position if trend “shows signs of deceleration as it extends”
  • Technicals (roll-adjusted):
    • Resistance: 131-16 (Feb. 12 high), 131-27 (pivot r3)
    • Support: 130-20 (June 6 low), 130-14+ (June 3 mid price), 129-27 (June 3 low)
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Aaron Kohli (Bank of Montreal)
David Ader (CRT Capital Group LLC)
Jason Hunter (Bear Stearns & Co Inc)
Jay Barry (JPMorgan Chase & Co)
Jim Vogel (Ftn Financial)

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UUID: 7947283

HALISTER1: CANADA ECO PREVIEW: Employment Data Due in 5 Minutes

CANADA ECO PREVIEW: Employment Data Due in 5 Minutes

(Bloomberg) -- Net change in employment seen at +1.8k in May vs -2.1k in April (forecast range -45k to +20k); down 3 of past 4 months
  • Canada’s unemployment rate seen at 7.2% in May vs 7.1% in April (forecast range 7% to 7.3%).
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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UUID: 7947283

HALISTER: Banks Mine Troves of Personal Spending Data in Marketing Push

Banks Mine Troves of Personal Spending Data in Marketing Push

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
JPM US (JPMorgan Chase & Co)

People
Dominic Venturo (US Bancorp/MN)
Jennifer Roberts (JPMorgan Chase & Co)
Lynne Laube (Cardlytics Inc)
Peter Krasilovsky
Richard Crone (Crone Consulting LLC)

Topics
BGOV Tech/Telecomm

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UUID: 7947283

HALISTER1: BofAML Recommends Brexit Hedges as Risks Not Evenly Priced

BofAML Recommends Brexit Hedges as Risks Not Evenly Priced

(Bloomberg) -- While the consensus view is that remain will win the June 23 vote on EU membership, opinion polls are still too close to be confident this will be the case and investors may want to consider hedges, BofAML analysts led by James Barty write in client note.
  • Brexit risk priced by GBP/USD vol is extreme compared to any other market; investors looking to harvest the FX/equity vol dislocation may consider selling July 16 GBP/USD call spreads to help fund July 16 SX5E calls
  • EUR/USD 1-mo. 25d puts offer over 2 times greater hedge benefit than GBP/USD puts at current pricing
  • In stocks, favor hedging via long VSTOXX July call spreads against a vote to leave and SX5E vs SPX Dec 16 outperformance calls, contingent on SPX being higher at expiry as a hedge for a vote to stay
    • Any Brexit would trigger a general risk-off event in global markets, with a spillover into global stock markets and currency markets more generally; given the uncertainty about what would happen next, unlikely there would be a swift recovery in markets
  • Still see attractive options in short sterling; buying an L U6 call option, financed by selling an L U6 put remains a cheap, efficient Brexit hedge
  • A 5s20s flattener in gilts will work well in BofAML’s base case of a remain as expect a steepening of 2s5s, with a gradual path of rate hikes getting priced back into the curve if the country votes to leave
  • Favor being short gilts vs bunds in both referendum outcomes
  • Cash credit investors don’t appear to be pricing in political risk and are more focused on the positive technicals so, should spreads continue on the current trend, the rally on a remain may be limited, while an exit would have an exaggerated impact
    • Says GBP bonds that have tightened most since announcement of CSPP would be most prone to widening if the U.K. votes to leave
    • These include BP 4.325% 2018, Standard Chartered 7.75% 2018, Unilever 2% 2018 and General Electric 5.625% 2019; same applies for euro bonds issued by U.K. names
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
James Barty (Merrill Lynch International)

Topics
Leveraged Finance

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UUID: 7947283