Halister News

(Bloomberg) -- Set-up conditional EUR trades at attractive prices as low-for-long and secular stagnation themes continue to gain credence, contributing to low expected rates volatility, Societe Generale strategist Adam Kurpiel writes in client note.

• Buy EUR 3m10y ATMF/ATMF-17bp receiver spread
  • 17bp spread corresponds to 1.5x the range volatility of the EUR 10y rate (11bp/3-mo.)
  • With premium below 7bp running (indicative), EUR 10y swap rate needs to decrease by less than 3bp for the strategy to breakeven
  • Better leverage than simple receivers unless bund 10y yield goes deeply negative

(Bloomberg) -- Reports that Norway’s sovereign wealth fund is planning to sue Volkswagen in response to the emissions scandal keep corporate credit event risk elevated, writes Bloomberg strategist Simon Ballard.

• Asian equity markets trading higher with oil stronger may offer some support for European mkts at open this morning
  • But weak China April factory output, retail sales and fixed-asset investment over weekend likely to be a drag on any positive sentiment; Whitsun holiday may also cap volumes today
• Global macro, Brexit, U.S. elections and corp earnings likely remain key drivers of risk asset sentiment
  • Just over 5 weeks until the U.K. referendum on EU membership there’s still little meaningful impact on GBP corp credit spreads
• Macro data points this week to include G-7 finance meeting in Japan as global growth concerns persist; U.S. inflation data eyed for next hint on Fed policy direction

• Risk Appetite Model sees volatility decline to lowest lvl since December 11 last year
• CDX IG currently +1.7bps at 83.26 in overnight session; iTraxx Asia Ex Japan IG is currently -0.3bps at 144.38

NEWS

• Corporate News
• British Land FY Underlying Profit Up; Rental Growth Strengthened
• Nordgold 1Q Ebitda Down 36% Y/y to $119.3m
• Sony Financial Forecasts Profit Below Analyst Estimate
• Vodacom Increases Growth Forecasts on Rising Network Investment
• Akzo Nobel India Rises After 4Q Net, Sales Beat Estimates

• Financial News
• VTB 1Q Net 1.7b Rubles vs Loss of 14.3b Rubles Y/y
• Bank of Singapore Sees Asia Rich Shift to Paying Fees for Advice
• Bank of Baroda Falls After Surprise 4Q Loss, NPA Addition View

• Credit Rating News
• Saudi Arabia, Bahrain Ratings Cut by Moody’s on Lower Oil Prices
• Poland Outlook to Negative by Moody’s, Rating Affirmed
• Indonesian Bonds Turn Top Asia Performers on Rating Upgrade Hope
• Fitch Says Growth, Governance Remain Key for Philippine Rating

• Other News
• Wall Street’s Bond Forecasters Splinter as Fed Credibility Wanes
• DP World Said to Hire Banks for Benchmark Dollar Sukuk Sale

ANALYST VIEWS

• Secondary spreads will find it difficult to rally amid poorer data from China over the weekend; but any weakness will be limited and the asset class will outperform stocks: creditmarketdaily.com

NEW ISSUES

• Daimler $100m 2.125% 4/2020 Tap MS +100
• Deutsche Bank EU150m 4/2019 FRN Tap
• EIB GBP1b 9/2021 UKT +45
• Metrovacesa EU700m 6Y MS +238
• 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) -- Prospects for fiscal measures and a delay in sales-tax hike in Japan may negatively impact its credit rating, leading to higher funding costs in foreign currencies for Japanese companies, says Tomohisa Fujiki at BNP Paribas.

• This may be reflected by today’s drop in USD/JPY’s 3-mo. basis swaps to -45.375 bps from -43.000 bps on May 13, says Fujiki, Tokyo-based chief rates strategist, in an interview; adds speculation of fiscal package and postponement in sales-tax increase and some other factors are exerting more steepening pressure on yield curve in a textbook-based reaction, weighing on super-long tenors
• Tomorrow’s 5-year JGB auction could go smoothly amid expectations of further BOJ easing: Fujiki; says entering a long 5-year ASW (buying cash JGBs vs paying IRS) position in the short-term looks attractive
• NOTE: Japanese PM Abe says fiscal measures may be needed to create demand; Abe has decided to postpone sales-tax increase, Nikkei reported
• JGB 10-year yield up 0.5 bp at -0.110%, 30-year yield up 1 bp at 0.360%

--KARTHIKEYAN SUNDARAM

(Bloomberg) -- The proof is in the pudding. One month after Singapore shifted to zero currency appreciation, the local dollar has held mostly steady against a basket of trading partners currencies, Bloomberg strategist Mark Cranfield writes.

• Since MAS eased policy on April 14, most of SGD’s declines against key trading partners like USD, GBP, EUR, JPY have been offset by gains vs other currencies such as AUD, CNY and MYR
• Click here for a chart of some SGD cross rates
• SGD is now around 0.5%-0.6% below mid-point of undisclosed NEER trading band
  • Since April 14, SGD NEER hasn’t deviated more than 1.0% above or below its mid-point, according to bank analysts including OCBC, Maybank and UOB
• Singapore interest rates have also moved little in past month
• Comparison of current levels with April 14:
  • SGD 1-year swaps 1.4250% vs 1.4900%
  • Sibor 1-month 0.75434% vs 0.73751%
  • 10-year bond yields 1.939% vs 1.966%
• NOTE: Singapore to ease FX policy in next 12 months: CS
• NOTE: Mark Cranfield is an FX strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- Convergence of real interest rates among major economies may be a strong reason why exchange rates have not undertaken large moves in response to changes in nominal rates, Richard Grace, chief currency and rates strategist at CBA, writes in note today.

• CBA updating its AUD/USD forecasts for first time since March 30 now sees;
  • AUD/USD at 0.7200 by end 3Q vs 0.7700 previously
  • Aussie at 0.7300 by year-end vs 0.7800 and 0.7500 by end 2Q 2017 vs 0.8000
• Falling unemployment rates in most major economies is blunting FX market reactions when nominal rates are changed, Grace says
  • Low inflation also means that real interest rate levels remain somewhat supportive of exchange rates despite nominal interest rate cuts
• AUD/USD up 0.2% to 0.7282

(Bloomberg) -- Aussie rises vs all major peers as markets mostly shrug off soft China data released over weekend, partly on view Fed has more reasons to keep policy unchanged. Nikkei leads Asian equities higher, along with advance in crude oil.

• Goldman Sachs raises WTI forecasts for 2Q-4Q and full-year 2016, as deficit looms; NOTE: WTI crude futures +1.3%, Brent crude futures +1.2%
• AUD/USD +0.14% to 0.7281, vs 0.7237-0.7293 range
  • FX pair reverses initial losses on intraday short- covering from leveraged funds after better-than-expected open in Japanese stocks, says an Asia-based FX trader
  • AUD is better bid on macro inflows vs NZD and JPY than USD, according to Asia-based FX traders
  • Iron-ore futures +0.4%, gold +0.3% and copper steady
• USD/JPY +0.12% at 108.76, vs 108.47-108.99 range
  • FX pair gains as local stocks climb amid hopes for fiscal measures as well as for a delay in Japan’s sales- tax hike: SMTB
  • PM Abe says in parliament that fiscal measures may be needed to create demand; Suga says no truth to report that Abe has decided to delay a sales-tax increase
• NZD/USD -0.03% at 0.6773, vs 0.6747-0.6776 range
  • New Zealand’s services post fastest growth in four months
  • Milk auction seen buoyed by futures, seasonals: First NZ
  • PM Key says not ruling out campaigning for a fourth term
• BBDXY +0.03% at 1,186.91, vs 1,186.62-1,188.04 range
  • Treasury 10-year yield up 1 bp to 1.710%
• EUR/USD +0.02% at 1.1311, vs 1.1302/1.1319 range
  • EUR risk-reversal spread at 2011 low on Brexit hedges: analysis
• GBP/USD -0.01% at 1.4363, vs 1.4339-1.4373 range
  • Leveraged funds cut net short GBP position to smallest since December