HALISTER: OCI Drops; Outlook More Challenging Without CF Deal: EFG-Hermes

OCI Drops; Outlook More Challenging Without CF Deal: EFG-Hermes

(Bloomberg) -- OCI NV drops as much as 9.6%, biggest intraday decline since Feb. 8; worst performer in SX4P, -0.7%.
  • Volume more than 1x 3-month daily average
  • EFG-Hermes says outlook for OCI “much more challenging” with CF deal off the table
  • Views OCI/CF deal termination “very negatively” as large part of investment thesis on OCI was the proposed merger with CF, which broker expected to be value accretive to shareholders
  • Deal was also expected to relieve OCI’s highly-leveraged balance sheet
  • Notes global fertilizer and methanol prices under “immense pressure” in 2016, cites global oversupply, lower oil prices
  • OCI also released 1Q trading update today with rev., Ebitda down y/y
  • Rates OCI buy
RELATED
  • Earlier: CF, OCI Terminate Proposed Combination of Some Businesses
    • CF says U.S. Treasury announcement on April 4 materially reduced structural synergies of the combination
  • OCI shares down 46% YTD, worst performer on the SX4P index (-9.5% YTD)
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
OCI NA (OCI NV)
CF US (CF Industries Holdings Inc)
HRHO EY (Egyptian Financial Group-Hermes Holding Co)

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UUID: 7947283

HALISTER: CEO-Class Private Jets Go Begging for Buyers, Crushing Prices

CEO-Class Private Jets Go Begging for Buyers, Crushing Prices

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
BBD/B CN (Bombardier Inc)
GD US (General Dynamics Corp)

People
Brian Foley (Brian Foley & Co)
Neil Book (Jet Support Services Inc)
Phebe Novakovic (General Dynamics Corp)
Stephen Wynn (Wynn Macau Ltd)
Steven Varsano (Jet Business)

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UUID: 7947283

HALISTER: CIC, KKR Consortium Said to Withdraw Bid for Yum! Brands Unit

CIC, KKR Consortium Said to Withdraw Bid for Yum! Brands Unit

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
CHIVCZ CH (China Investment Corp)
KKR US (KKR & Co LP)
YUM US (Yum! Brands Inc)

People
Carl Icahn (Icahn Enterprises Holdings LP)
Fang Fenglei (Goldman Sachs Gaohua Securities Co)
Keith Meister (Corvex Management LP)

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UUID: 7947283

HALISTER: Emerging Stocks Advance as Apple Suppliers Rally; Ruble Weakens

Emerging Stocks Advance as Apple Suppliers Rally; Ruble Weakens

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
AAPL US (Apple Inc)

People
Chow Koon (Union Bancaire Privee)
John Teja (Pt Ciptadana Sekuritas)
John Williams (Upland Resources Inc)
Nizam Idris (Macquarie Group Ltd)

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UUID: 7947283

HALISTER1: RESEARCH ROUNDUP: Flatteners Favored After Fed; Front-End Plays

RESEARCH ROUNDUP: Flatteners Favored After Fed; Front-End Plays

(Bloomberg) -- Analysts focus on recent shift in Federal Reserve comments and indicate bias toward curve flatteners, expressed through a variation of trades.
  • Deutsche Bank (strategists including Dominic Konstam)
    • Fed interpreting easing in financial conditions as opportunity to force rate expectations higher; ease in conditions due to Fed’s dovish turn earlier this year
      • Hawkish minutes will weigh on risk, bias yields lower, flatten the curve and keep risk premium supported at the front-end
    • Recommend fading recent weakness in the belly, should not be materially different from where it was before the minutes
      • Recommend vanilla/mid-curve conditional bear flatteners in the belly; buy 3m2Y ATMF payers vs 3m2Y2Y 14bp OTM payers at zero cost
  • Citi (strategists including Jabaz Mathai)
    • Front-end does not provide much risk/reward for longs; using shorts in front-end via put spreads on EDZ6 to hedge overall bullish duration bias
    • See downside risks to U.S. growth, premature for market to price higher terminal rate; 10Y+ sector attractive following recent sell-off; expect these tenors to perform, leading to further flattening
      • Continue to like call spreads on the bond, 5y5y longs vs Europe, 10s30s flatteners
  • Morgan Stanley (strategists including Matthew Hornbach)
    • Remain neutral on duration; Fed’s shift to more hawkish stance should be negative for risk, how negative will depend on Fed policy expectations after the next hike
      • FOMC comments suggesting “at least” two hikes this year seem appropriate; will cap upside in risky assets and may send then meaningfully lower; dot plot will be key
    • Continue to recommend 2s5s steepeners initiated after the Fed minutes: MORE
  • JPMorgan (strategists including Jay Barry)
    • Unwind 5Y duration shorts following recent sell-off, turn neutral on Treasuries; little over the near term to cause markets to price significantly higher odds of Fed tightening
    • USD appreciation following more hawkish Fed may lead markets to reduce projections for medium-term normalization
    • Neutral bias opens opportunity to earn carry; continue to prefer 1x2 receiver spreads in blues, offers initial bearish exposure, attractive breakeven level
    • More hawkish Fed policy outlook is bearish for EM FX; may prove negative for front-end, intermediate spreads given potential for reserve outflows; unwind OIS wideners in 2s, 5s
  • BNP (strategists including Lawrence Mutkin)
    • April FOMC minutes were hawkish, caught markets napping; BNP economists see Fed on hold through 2016, 2017, though acknowledge risks to this view
    • As market prices in greater probability of higher Fed Funds rate, expect 5Y swap to cheapen on the curve; recommend paying 2s5s10s, entry -6bps, target 10bps, stop -13bps
  • Barclays (strategists including Rajiv Setia)
    • Maintain UST 5s30s flattener given more hawkish Fed outlook; spread still ~10bps too steep to fair value
    • Recommend buying 6m3Y ATM, ATM+27bps 1x2 payer spread at zero cost; aims to fade rich levels in top left vols, position for increase in rates
    • Recommends being short 7s on 3s7s10s fly, hedged for market directionality, to position for belly supply: MORE
  • SocGen (strategists including Vincent Chaigneau)
    • Summer rate hike back on the table following FOMC minutes, risks in USTs now skewed to downside; continue to recommend positions that profit from belly underperformance
    • Add or hold 6m fwd 5s30s bear flatteners (6m5Y payer spread vs 6m30Y payer), 6m10Y costless payer ladder ATM/+18.5bps/37bps
    • Recommend paying USD 2s5s10s fly vs EUR, adding the EUR leg improves carry and roll on the trade
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Dominic Konstam (Deutsche Bank AG)
Jabaz Mathai (Citigroup Inc)
Jay Barry (JPMorgan Chase & Co)
Laurence Mutkin (BNP Paribas SA)
Matthew Hornbach (Morgan Stanley)

Topics
BFW US Treasury Analyst Wrap

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UUID: 7947283