Halister News

(Bloomberg) -- Europe “Target2” imbalances are on the rise and approaching peaks seen in 2011 and 2012, suggesting the impact of ECB QE may be the opposite of what had been hoped, Capital Economics analyst Jack Allen writes in client note.

• Data shows that banks in Europe’s periphery are buying bonds issued by core countries; purchases of non-Italian government bonds by Italy’s banks are equal to around a third of the increase in the country’s Target2 deficit, since March 2015
• German banks though appear to have sold more non-German EGBs since the start of QE
• This suggests ECB’s ability to stimulate the region’s most troubled economies is limited and that growth and underlying inflationary pressures in those countries will remain weak
• NOTE: Rising imbalances reflect a fall in private liquidity as yields remain unattractive and amid doubts about the future of the union, and hint at ECB policy reaching its limits, Commerzbank analysts wrote on May 25

(Bloomberg) -- Japan’s sovereign bond curve steepens, led by super-long end. BOJ’s bond purchase program for June, which was announced on May 31, is negative for super-long tenors given the amounts for 10y-25y tenor and 25y+ tenor decreased by 20b yen from May.

• Click here for weekly change in yield curve and here for market snapshot
• Ministry of Finance to sell 30-year govt bonds on June 7, and 5-year govt bonds on June 9
• Nation’s final reading of 1Q GDP on June 8 to be released on June 8; est. 0.5% q/q vs 0.4% preliminary reading; economists sees final figure may be revised up due to stronger-than-expected 1Q capital spending
• BOJ said it will buy fewer bonds with residual maturity of more than 10 yrs and up to 25 years; will purchase 220b yen in June, down from 240b yen in May; BOJ also to cut purchase size for tenors over 25 years to 140b yen from 160b yen
• Prime Minister Abe announced on June 1 a delay to sales tax hike and promised bold economic steps in the autumn
  • S&P Global Ratings raised its real GDP growth forecast for Japan in 2017 to 1.0% from 0.4% earlier on delayed tax hike
  • Moody’s Investors Service says Japan’s sales tax delay is credit negative as it raises further questions over the government’s ability and willingness to meet its stated fiscal consolidation goals
  • Fitch awaits more details on revised fiscal plans before decision on Japan’s rating
• Govt’s sale of 2-year bonds on May 31 drew strongest demand since Dec. 2014; sale of 10-year bonds on June 2 drew strongest demand since August 2014

• WHAT THEY SAY

• DIAM (Nobuto Yamazaki, executive fund manager)
  • Market cautious about a weak result for 30-year bond auction as current market rate is too low
  • 30-year yield may trade 0.29-0.39% range as auction may trigger volatility

• JPMorgan Asset Management (Genji Tsukatani, fund manager)
  • Unless yields fall ahead of auction, 30-year and 5-year bonds auctions could go smoothly as market is getting used to low rates

• Okasan Securities (Makoto Suzuki, senior bond strategist)
  • Market participants and investors unlikely to trade ahead of June FOMC and BOJ meetings
  • 5-year and 30-year bond auction may go smoothly as investors could buy on dips on back of large bond redemptions this month

• NOTE: JGBs worth about 18t yen ($165b) will mature this month (excluding T-bills, linkers and floating bond), with large proportion June 20, according to data compiled by Bloomberg

(Bloomberg) -- Nation’s strict deposit secrecy laws must be repealed or amended because it curbs anti-money laundering enforcement, Bangko Sentral ng Pilipinas Deputy Governor Vicente Aquino tells reporters in Cebu province.

• Repeal of law may be difficult; it may be amended to authorize central bank to inquire into bank deposits and investment in examining compliance to banking laws
• Law must be changed to add tax evasion, securities violation as predicate crime to money laundering where no court order is required to look into deposits
• Ombudsman or Department of Justice must also be authorized to inquire into bank deposits and investments in preliminary investigation
• Law must also require less evidence to inquire into bank deposits and investments, Aquino says; currently, Anti-Money Laundering Council must establish probable cause on predicate crime to laundering before securing court order
• Casinos, art dealers and real estate agents should be added to list of covered institutions which report to dirty money watchdog; they must also practice know-your-customer procedures
• Aquino says he’s hopeful administration of President-elect Rodrigo Duterte will push for speedy enactment of amendments

(Bloomberg) -- Search is in connection to money-laundering investigation involving HSBC, El Mundo reports.

• Investigation is directed by Judge De la Mata and anti- corruption prosecutor, newspaper says
• Spokesman for Santander declined to comment when contacted by phone by Bloomberg
• Link to El Mundo story {http://goo.gl/DltoAe }