Halister News

(Bloomberg) -- Enhance coupon income by selling rich EUR vega optionality, especially with prospects of IRS trading within a relatively tight range at low levels, Commerzbank strategist Markus Koch writes in client note.

• Buy “Triple or Quit” EUR note with current coupon of 2.59% p.a. for 20y term
  • At the end of year 3, issuer is entitled to either prepay the note in 2019 or tender EU2m of notional on top of the initial issuance amount at that date, with EU1m as regular/minimum lot
  • For investors who can plan part of their investment needs in advance, this offers an attractive opportunity to benefit from selling optionality

(Bloomberg) -- Belgium to sell 4.25% 09/2021, 1% 06/2026, 1% 06/2031, 5% 03/2035 for EU2.8b-3.5b at 11:30am CET; analysts see 10Y as rich, though likely result of dealer shorts; OLOs offer value vs France, SocGen and ING say.

• SocGen (Marc-Henri Thoumin)
  • 09/2021 bond has cheapened vs 03/2022, which may help demand; 06/2026 remains at rich levels relative to the curve, expect limited interest in this issue
  • Both longer-dated issues have underperformed shorter maturities of late; expect a rebound at the long end after the auction, should support curve flattening
  • Bonds have underperformed equivalent OATs ahead of the auction, which may support demand; expect some convergence post-auction

• ING (Martin van Vliet)
  • Limited flows, richness of 2035 bond on the curve point to short base among dealers
  • 2031 offers 7bps pickup vs OATs; 2026 offers 14bps pickup vs 2025s, 5bps vs France
  • 2026s trade nearly 20bps spreads in report, indicates a short base from dealers; expect decent demand for this line

• Mizuho (Antoine Bouvet)
  • As in France, 5Y sector is cheap, 10Y is expensive; see value in owning 09/2021 on the curve; 06/2026 offers micro relative value, though sector itself is rich
  • Both long-end issues look cheap on the curve, showing signs of auction concession

(Bloomberg) -- A potentially event-filled week, with the initial macro focus likely on headlines after the inconclusive Doha oil talks and any EM weakness due to specter of impeachment of Brazil’s President Rousseff, writes Bloomberg strategist Simon Ballard.

• IG/HY credit spreads could come under some near-term pressure from fragile sentiment, but cash bonds generally seen underpinned; synthetic indexes likely to see lion’s share of any volatility
  • Earnings season to continue to offer event risk data points; Amazon, Alphabet, Netflix, Johnson & Johnson and McDonald’s among key results to watch this week
  • Brexit debate likely to dominate GBP credit mkt over coming weeks; uncertainty may undermine risk appetite
  • Other key macro data points this week include U.S. retail sales and euro area GDP
• Risk Appetite Model saw further marginal tightening of spreads and vol into close last week on back of robust tone to risk asset mkt sentiment

• CDX IG is currently +2.0bps at 80.21 in overnight session; iTraxx Asia Ex Japan IG is currently +0.8bps at 140.27

NEWS

• Corporate News
• Toyota Seen Losing $277 Million as Quakes Halt Japan Output
• Reckitt 1Q LFL Sales In Line, On Track to Meet 2016 Targets
• Qantas Drops Most in Two Years as It Cuts Domestic Expansion

• Financial News
• CaixaBank Launches EU1.6B Takeover Bid for Portugal’s Banco BPI
• Banker Unrest Threatens Credit Suisse, Deutsche Bank Turnarounds
• HSBC’s Gulliver to Step Down in Two Years, Sunday Times Says

• Credit Rating News
• China State Enterprises Likely to Suffer More Defaults, S&P Says
• S&P Report Says Net Negative Outlook Bias For Asia-Pac Rises
• Bahamas Affirmed ’BBB-/A-3’ by S&P, Outlook Remains Negative

• Other News
• Rousseff Hangs by a Thread After Losing Impeachment Vote
• Oil Plunges After Output Talks Fail Amid Saudi Demands Over Iran
• Treasuries Gain as Oil Plunge Drives Demand for Haven Assets
• India 10.5% Junk Dollar Bond Rally Endures as S&P Praises Revamp

ANALYST VIEWS

• If the ECB doesn’t deliver on its corporate-bond purchase program, spreads will gap wider, performance will be lost and borrowers will face higher funding costs: creditmarketdaily.com

NEW ISSUES

• No European Syndicated Corporate Bond Issuance Friday; fourth zero issuance day YTD
• 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) -- USD/KRW non-deliverable forwards accounted for 37.6% of total volume today, according to trades reported to DTCC; USD/MYR second-most active at 21.7%, USD/TWD third-most active at 14.6%.

• Notional amounts traded include:
  • $100m of USD/KRW at 1,153.70: matures June 20
• Total volume was $4.6b as of 2:41pm HKT; global total on April 15 was $35.0b, with USD/BRL accounting for 31.0%

--KARTHIKEYAN SUNDARAM

Economic Release Details: {INFINFY Index ECOD} --KARTHIKEYAN SUNDARAM