Halister News

(Bloomberg) -- Australia’s bond market is “sowing the seeds of its own undoing as an asset class,” Andrew Canobi, director for Australian fixed income at Franklin Templeton, writes in note received Wednesday.

• Cites modified duration of Bloomberg AusBond Composite Bond Index rising to a fresh record of 4.9
  • Duration has increased as govt issuance escalates, average tenor lengthens and yields decline
• As yields plumb ever lower depths, maturing bonds are being refinanced at lower coupons
• Sees possible combination of very long duration, very low rates and very little coupon
• “With RBA cutting to 1.75% and good reason to believe there is more to come, the party can continue for a while yet,” Canobi writes. “But this is one where overstaying one’s welcome will result in one mighty hangover.”

(Bloomberg) -- The IT services specialist’s software products will help the startup begin banking operations, co.s say in statement.

• Paytm will soon launch services such as current account and savings products for its 126 million digital-wallet users
• Infosys product Finacle will help with compliance and integrate with other apps to prevent money laundering
• Paytm aspires to provide small-value, high-volume transactions for millions of Indians: Paytm Payment Bank CEO Shinjini Kumar

Note: Infosys is India’s second-largest software services company. Paytm is the consumer brand of One97 Communications, whose investors include Ant Financial, Alibaba and Silicon Valley Bank.

(Bloomberg) -- USD/KRW non-deliverable forwards account for 35.6% of total volume today, according to trades reported to DTCC; USD/INR second-most active at 19.0%, USD/IDR third at 12.4%.

• Notional amounts traded include:
  • $150m of USD/IDR at 13,260; matures July 13
• Total volume was $12.9b as of 2:41pm HKT; global total yday was $86.1b, with USD/KRW accounting for 21.3%

(Bloomberg) -- ECB starts buying corporate bonds today as part of its CSPP, a milestone in the history of EUR credit markets. Immediate impact on prices may be small though; recent spread performance suggests that much of the positive effect of there being a new marginal buyer may already be priced in, Bloomberg strategist Simon Ballard writes.

• Market will be eagerly awaiting details of EU central banks buying corporate bonds on behalf of the ECB; but holdings under the CSPP will only be published/updated on a weekly basis
  • Poor secondary mkt liquidity suggests initial evidence of buying may be limited; spreads could see some consolidation if volumes disappoint
• Overnight Asian stock declines on China trade data may weaken EUR credit-mkt sentiment this morning, but cash bonds likely underpinned by CSPP
• Risk Appetite model registered further decline in spread dispersion on eve of CSPP commencement

• CDX IG closed +0.7bps at 73.86 in overnight session; iTraxx Asia Ex Japan IG currently +0.7bps at 139.21

NEWS

• Corporate News
• Sainsbury 1Q LFL Retail Sales Ex-Fuel Beat Estimates
• WH Smith 14-Week Like-for-Like Sales Flat, Confident for FY
• Boohoo.com 1Q Sales Up 41%, Raises FY Sales Growth Forecast

• Financial News
• National Australia Taken to Court as Rate-Fixing Case Widens
• India Private Bank New Loans Outpace State Rivals for First Time

• Credit Rating News
• 1MDB Defends Liquidity Position After Moody’s Removes Rating
• Indonesia Euro Bond Costs Edge Up on S&P as Deficit to Swell
• ContourGlobal LP Rating To ’BB-’ from ’B+’; Otlk Stable: S&PGR

• Other News
• Clinton Claims Historic Victory as Battle With Trump Opens
• Draghi Fires Starting Gun on Corporate Bond Purchases in Europe

ANALYST VIEWS

• We will all look back at this moment in history and shake our heads in disbelief; in the meantime, there’s no point betting against the continued grind lower in yields/higher (govie) bond prices: creditmarketdaily.com

NEW ISSUES

• eircom Finance EU500m 6NC2 Senior Secured 4.5%
• State of Hessen EU1.125b Long 10Y MS -6
• Ile De France EU650m 9Y Green Bond OAT +30
• JPMorgan Chase EU2.5b 2Y FRN 3mE +22
• NordLB Lux. Covered Bond Bank EU500m 7Y MS +20
• Stora Enso EU300m 7Y MS +200
• Sumitomo Mitsui Financial EU1.5b 10Y MS +105
• Westpac NZ EU750m 5Y Covered MS +18
• Indonesia EU3b 7Y, 12Y Bonds
• 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) -- Majority of currencies in region advance as dollar heads lower for fourth session; China May exports in line with forecast, while imports beat expectations, boosting Aussie.

• USD/Asia is still heavy as dollar continues to soften, while PBOC’s yuan fixing little changed today, so reaction limited, ANZ FX strategist Irene Cheung says
• Dollar Index -0.08%, extending decline to fourth day
• China May trade surplus at $49.98b vs $55.70b est. and $45.56b in April; exports -4.1% y/y vs est. -4.0% and -1.8% prior; imports -0.4% y/y vs -6.8% est., -10.9% in April
  • Yuan edges higher, set for first day’s gain this week; PBOC strengthens CNY fixing by 0.04%, smallest move either way since May 31
  • Central bank chief economist Ma Jun says yuan pricing mechanism is increasingly transparent and currency is flexible vs basket
  • U.S., China at close of Strategic & Economic Dialogue yday reiterate pledge not to target FX rates and to refrain from competitive devaluation; China says no basis for sustained depreciation of yuan
  • Chinese govt maintains 6.8% 2016 GDP growth est.
  • AIIB to announce first investments on June 24: China Daily
• Yen strengthens a second day, up vs all G-10 peers as probability of June hike by Fed evaporates; Nikkei 225 falls
  • Japan’s revised 1Q GDP +1.9% annualized, same as est.; World Bank lowers Japan economic growth outlook to 0.5% from 1.3%
  • BOJ expected to ease in June or July, survey shows: Nikkei
  • Purchases of Canadian govt bonds by Japanese investors at 10-yr high in April; China purchased record 2.2t yen ($20.6b) Japanese short-term debt in April: analysis
• Aussie strengthens after Chinese trade data, erasing some losses as Australian exports to China grow
  • April home-loan approvals rose 1.7% m/m vs est. +2.5%
  • AUD/USD unlikely to strengthen much more, BNP Paribas says in note dated June 7; minimal short positioning heading into RBA decision yday and only 50% probability of rate cut by Aug. priced in
• Ringgit set to snap three-day gain; Moody’s withdraws rating on $1.75b worth of 1MDB Energy notes; 1MDB says its liquidity is strong after Moody’s action
  • Foreign reserves at $97.3b as of May 31
• Rupiah rises to one-month high; Indonesia’s FX reserves fell to $103.6b in May from $107.7b in April
  • Finance commission agrees on macroeconomic assumptions in proposed 2016 budget revisions: GDP growth of 5.1%, CPI +4%; rupiah avg 13,500/USD
• Peso rises to highest in seven weeks; international funds bought net $53m of local equities yday, biggest inflow since May 26: exchange data
• Thai baht edges lower after six straight days of gains, even as global investors bought net 32.2b baht ($914m) in local bonds yday, most since Sept. 2013, according to TBMA data