Halister News

(Bloomberg) -- USD rates receiver spreads and upside options on gold outperform relative to the yen as Kim Jong Un’s latest provocation tests the boundaries of an international response.

• While the correlation between gold and yen is at record highs, volatility ratios between the two are near historic lows, suggesting gold may offer a more efficient payoff structure, see more here from Aug. 25
• Risk-off option structures on gold that have low premiums and high convexity exposure may be attractive to hedge a full-blown crisis from either geopolitical risks or White House turmoil, see more here from Aug. 21
• See example structure here from July 14 on how receiver spreads may appeal to investors looking to hedge geopolitical risks that game theory suggests will ultimately not lead to conflict, as well as the evolution of the Fed’s reaction function from rate hikes to reliance on balance-sheet reduction for policy normalization
• TY Oct. futures calls extend richening over puts, while ATM 1-month +0.5-ppt at 4.2% remain historically subdued; see chart here; KOSPI2 3-month ATM implied volatility has increased to 13.3% but remains below the Aug. high of 16%; gold +$11 to $1321, 10Y UST -6bps at 2.10%, USD/JPY -0.7% to 108.50
• NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Tanvir Sandhu in London at tsandhu17@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Keith Jenkins

(Bloomberg) -- Sovereign rupee bonds are likely to trade in a narrow range in the coming weeks given the absence of any major triggers, says Harish Agarwal, Mumbai-based fixed-income trader at the local unit of South African lender FirstRand.

• “After the last rate cut, market is not factoring in any rate reductions by the RBI as inflation came in higher than expectations,” he says
• Even global events, including geopolitical tensions, aren’t having much impact on India
• Sees 10-year bond yield in 6.50%-6.60% range for the next three months
• Market trading cautiously after the last rate cut and demand from foreign investors likely to be subdued as limits are almost exhausted: Agarwal
• Expect a very tight-range market till the next policy decision on Oct. 4
• Yield on 6.79% bonds due May 2027 little changed at 6.57% Tuesday; rose 3bps Monday to 6.57%, which was the highest close since June 6 
• Yield fell by 1bp earlier during the day as bonds were slightly supported after the government Monday announced sale of 90b rupees of new bonds maturing in 2031 on Friday, he says

To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

--TIMOTHY SIFERT

--VEN RAM

(Bloomberg) -- Bund futures (RX1) technical levels in focus.

• Daily Trend Bias: Bullish
• Comment: Gap higher amid risk-off sentiment; June highs in sight at 165.44-55; daily momentum profile stays bullish and not yet at overbought state
  • Resistance: 165.17; 165.33; 165.44-55; 165.77
  • Support: 164.77-76 (pivot, uncovered close); 164.58-57; 164.44 (13-EMA); 164.37-36
• NOTE: Roll-adjusted by difference in GFUT
• NOTE: Sejul Gokal is a FICC technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Sejul Gokal in London at sgokal1@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Scott Hamilton

(Bloomberg) -- Calendar spread in Japan’s 10-year note futures between September and December contracts will come under tightening pressure as roll activity approaches, Morgan Stanley MUFG strategist Koichi Sugisaki wrote in note Monday.

• Spread may compress to 17/18 from 21/22 Monday
• Overseas investors have bought more than 10,000 contracts of JGB futures, and the average purchase cost appears to be about 150.50-60, which is currently deep in the money
• Sees long-roll demand from these investors unless market adjusts significantly from here
• Current spreads are wide relative to implied value of cheapest-to- delivery spreads
• NOTE: September contract will last trade on Sept. 12

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

(Bloomberg) -- Here’s a roundup of Indian co. debt-rating changes.

• To get this story sent to your inbox real-time, run NI INRATINGS, click on Display & Edit, then Set Alert Delivery

DOWNGRADES

• Raunaq EPC International
  • Long-term rating cut to BB+ from BBB- at Crisil
  • Cites deterioration in business-risk profile in FY17, stretch in receivables with debtors
• Singhal Builders
  • Long-term rating cut to BB- from BB at Crisil
  • Cites weakening of business- risk profile, because of decline in revenues along with higher- than-expected cash withdrawal

UPGRADES

• Santlal Industries
  • Long-term rating raised to BB- from B+ at Crisil
  • Cites improvement in business and financial risk profile

(Bloomberg) -- Investor sentiment was worsening even before North Korea fired a missile over Japan because of the U.S. debt ceiling and a possible government shutdown, according to Mizuho Securities.

• “If it had been just a missile, the market reaction wouldn’t have been as big as this,” Hiroko Iwaki, senior foreign bond strategist at Mizuho in Tokyo, says by phone Tuesday
• Debt ceiling is spurring risk-off moves and bond buying even though it could cause a U.S. rating downgrade
• Should the risk of a U.S. govt shutdown rise, 10-year yield may fall to 2%
  • NOTE: Treasury 10- year note futures gain as much as 11/32 to 127-11/32, highest for front-end contract since Nov. 11, after North Korea fired missile. 10-year yield drops 3 bps to 2.13%
• Suggests investors avoid buying Treasuries now given they are fairly overvalued in the current range
• After touching 2%, “yields will almost certainly rebound, so it’s better to build long positions at higher yields rather than betting on a military conflict or a government shutdown that may or may not happen,” she says

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net