Halister News

(Bloomberg) -- Analysts turn less bullish on EUR front-end, more positive on peripheral following ECB’s easing measures; some focus on large EGB redemptions coming in April.

• Citi (strategists including Harvinder Sian)
  • ECB’s bazooka backfired, rate cuts taken off the table, further easing to be priced out, then buy duration; periphery is aided by TLTRO-II carry trades, correlation to corporates
  • Recommend paying Dec ECB Eonia at -0.40% (which implies a 6bps rate cut), target -0.34%, stop -0.45%
  • Despite more ECB “easing”, bund yields to mildly rise during second half of the year, retain target ~0.05% in near term
  • ECB dialing down the market expectations future depo rate cuts, bullish for the long-end; recommend receiving EUR 5y5y at 1.35% (currently 1.27%), target 1.05%, stop 1.50%: MORE

• Barclays (strategists including Cagdas Aksu)
  • Post-ECB, now forecast end-2Q 10Y Bund yield at 40bps, expect volatile trading likely in a range of 10bps-70bpps over Q2
  • Remain neutral on duration, curve and periphery spreads near term; maintain short 7Y Belgium vs Ireland, Netherlands
  • April redemptions in EGBs will be very large, ECB’s higher purchase pace will mainly have to come in EGBs during April, should give some support to duration
  • Maintain bullish view on breakevens following ECB meeting; recommend going long 2Y euro HICPx, looks cheap vs forecasts, has underperformed on the micro curve in the recent rally

• Deutsche Bank (strategists including Francis Yared)
  • Effectiveness of monetary policy declining with risk premium it is leaning against; ECB’s decision should still be supportive of credit, credit transmission mechanism, Eurozone economy; latest ECB will make it easier for Fed to press ahead with tightening
  • Exit short April sonia, maintain long EUR 10Y breakeven; enter a long 5Y BTP, which should benefit from ECBs’s credit easing measures, particularly 4Y LTRO
  • Enter Germany 10s30s flatteners; scarcity of German bonds will be exacerbated by increased QE; model suggests curve is ~6bps too steep; macro perspective argues for steeper curve, see this trade as tactical

• RBS (strategists including Andrew Roberts)
  • Given ECB’s willingness to use its balance sheet, market implications are bullish for periphery, curve flattening
    • Recommend going long 30Y BTPs
  • ECB remains behind the curve, no reason to expect this is final ECB easing announcement of 2016; remain bullish bias in core, target maintained at -0.10% in 10Y bunds
  • Carry trade using new LTRO money is back on, recommend longs in PGB 2020, which offers good carry and roll

• Mizuho (strategists including Peter Chatwell)
  • ECB structurally shifted away from cutting depo rate, makes monetary transmission more efficient; increase in QE will flatten curve, tighten spreads
  • QE, LTRO-2 to encourage yield grab, EUR 5Y5Y to head lower; recommend adding longs in 10Y France, currently 0.61%, target 0.40%, stop at 0.72%

• Morgan Stanley (strategists including Matthew Hornbach)
  • Suggest investors go long duration across G-4 bond markets over the next 6-months; expect yield curves to bull-flatten by more than forwards in the U.S. and U.K.
  • Recommend U.S., U.K. 2s10s curve flatteners vs steepeners in Germany and Japan; prefer 5s30s flatteners in the U.K. vs 5s30s steepeners in Germany
  • Larger ECB purchases, upcoming redemptions, second round effects from new LTROs should support sovereign spreads; recommend tactical longs in 5Y BTPs vs Bund; France 10s30s flatteners vs Germany
    • Longer term still concerned about political risks, weaker growth; spreads may widen out in second half of 2016

• SocGen (strategists including Vincent Chaigneau)
  • Stick to small long G-4 duration, given ongoing dangers for the economy, limited near-term upside for oil prices, risks to financial stability
  • See limited scope for much follow through weakness in 5Y EUR swap rates, after the ECB; retain cautiously positive view on non-core bonds, despite the deteriorating credit metrics: MORE

• BNP (strategists including Eric Oynoyan)
  • Setbacks that followed most previous ECB rate decisions proved short-lived, and paved the way for decent rallies
  • Decision to conduct larger monthly QE purchases will also lead to larger purchase of sovereign debt, despite the extension of purchases to non-financial corporate bonds
  • See more downside on ERU6 and ERZ6 future contracts: MORE

--ANDREW J. BARDEN

(Bloomberg) -- Sell EUR short-end as rates can’t stabilize until ECB easing is priced out; that said, there’s not that much left to price out, Citigroup strategist Harvinder Sian writes in a client note.

• Retain bund yield near-term target of ~0.05%; expect mild rise in bund yields during the second half of 2016
  • ECB will be running out of bunds to buy after the move to expand QE to EU80b per month
  • If corporate buying mimics the BOE’s problems and is only EU5b per month, then bund limits may be reached in 4Q 2017
• Favor flatteners as upsizing has a duration effect and positions are light; periphery is bullish and real rates remain especially high here
• ECB buying corporate bonds squeezes this market and makes euro issuance more attractive for non-residents, resulting in long-end EURUSD cross-currency basis wideners

(Bloomberg) -- Nation’s Anti-Money Laundering Council must have power to immediately freeze suspicious accounts and must have authority to inquire into bank deposits for all predicate crimes without court order, SEC Chairman Teresita Herbosa tells reporters in Manila.

• NOTE: When anti-money laundering law was passed in 2001, council had authority to freeze for up to 15 days accounts linked to unlawful activity; council may also examine deposits with court order http://goo.gl/hIhbDp
• NOTE: In 2002 amendment, council required to seek Court of Appeals approval to freeze any monetary instrument or property and allowed inquiry without court order for certain crimes http://goo.gl/UXyeXW
• Nation also needs to expand list of entities required to report suspicious transactions, says Herbosa, who’s also member of council
• NOTE: Casinos, property sector, art collecting sector must be included on list of covered institutions, Senator Serge Osmena said March 2 Link
• Philippines investigating how funds allegedly stolen from Bangladesh central bank entered its financial system, has done more to strengthen its anti-money laundering law compared with other countries, SEC chairman says
• NOTE: $1 Billion Plot to Rob Fed Accounts Leads to Manila Casinos Link
• “Not all countries have the same level of progress when it comes to passing all these anti-money laundering laws. I would say the Philippines is almost there on the top tier,” Herbosa says
• “I doubt if they would say that we are that severely lacking in anti-money laundering measures,” she says referring to Financial Action Task Force
• Philippines has “high-level cooperation” with other countries vs money laundering
• This case could encourage lawmakers to amend, strengthen law; “a very good stimulus for everyone to seriously consider who should and who should not be covered”
• NOTE: Senate invited members of council including central bank Governor Amando Tetangco, bank executives like Rizal Bank President Lorenzo Tan and certain individuals for scheduled hearing on March 15, 1:30pm local time
• NOTE: President Benigno Aquino must expedite signing into law of approved bill creating Department of Information and Communications Technology that will help protect banking system from hackers, Senator Ralph Recto said http://goo.gl/GIFgrJ

(Bloomberg) -- The increased depth of the technical bid for credit risk, created by the ECB, suggests a still-robust outlook for corporate bonds, Bloomberg strategist Simon Ballard writes. We may see some profit-taking in the coming days following the risk rally late last week, and as focus turns to FOMC, but positive sentiment should persist overall.

• Cash bonds are cheap relative to underlying synthetic CDS mkts and the ECB bid for EUR-IG non-bank corporate debt should see liquidity and spreads chased tighter
  • With liquidity already low in many areas of the corporate bond space, BBB non-financial companies may be focal point for ECB buying, but expect spreads across the rating spectrum to ratchet tighter
  • Momentum may also be buoyed by recent short-sellers now scrambling to cover positions, as well as fact that penal (negative) rates on cash holdings should encourage near-term risk-taking
• ECB has sparked decline in spread dispersion but rise in volatility shown in Risk Appetite model

• CDX IG currently -2.5bps at 82.99 in overnight session; iTraxx Asia Ex Japan IG currently quoted -5.4bps at 135.84

NEWS

• Corporate News
• SSE Sells Stake in Clyde Wind Farm for GBP355m Consideration
• Fevertree FY Earnings Rise, Says Encouraging Start to 2016
• Telstra, San Miguel End Talks on Philippines Wireless JV
• Bashneft 4Q Net RU6.9b Falls 69% Q/q; Adj. Ebitda Also Declines
• China Vanke Surges Most in 16 Months on $9.2 Billion Deal

• Financial News
• Credit Agricole Tenders to Buy Up to EU4b Covered, Tier 2 Bonds
• Helvetia 2015 Underlying Profit Rises, Raises Dividend

• Rating News
• Fitch Affirms Wesfarmers Ltd at ’BBB+’; Outlook Stable
• Moody’s reviews KORES’ Aa2 ratings for downgrade
• S&P Takes Various Rtg Actions On 32 Classes Of 10 Japan RMBS

• Other News
• Morgan Stanley Says Bonds Set to Surge in 2016 Year of the Bull
• Bond Traders Can’t Sleep as Fed Policy Becomes a Foreign Affair
• Brent Swings Near $40 as Falling U.S. Rigs Counter Iran Output

ANALYST VIEWS

• We have a marginal buyer with the deepest pockets of all. All roads lead to a tightening in spreads everywhere: creditmarketdaily.com

NEW ISSUES

• AP Moeller-Maersk EU500m 3Y FRN 3mE +160; EU1b 5Y MS +180
• Valeo EU600m 10Y bonds MS +110
• Intesa Sanpaolo EU1.25b 7Y covered MS +45
• 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) -- Portion of funds allegedly stolen from Bangladesh Bank and entered Philippine financial system will be recovered, SEC Chairman Teresita Herbosa tells reporters in Manila, declining to say how much can be returned.

• NOTE: Bangladesh Slams ‘Incompetent’ Central Bank After Account Hacked; $20m of stolen funds recovered, $81m outstanding Link
• Asked whether Anti-Money Laundering Council preparing charges for violation of law against dirty money, Herbosa says yes, declining to provide specific details
• “That’s always part and parcel of any investigation; if some unlawful activity has arisen, the proper govt agency or agencies should determine who will be held liable”
• NOTE: Philippines Prepares Charges in Bangladesh Bank Acct Case: WSJ Link

--With assistance from Cecilia Yap in Manila.

(Bloomberg) -- Stronger exports of manufactured goods to widen trade surplus to $1.1b in Feb., central bank says, reported by Investor Daily.

• If realized, it will be higher than even the most optimistic of forecasts in Bloomberg survey, which shows trade surplus widening to $92m from $51m in Jan.
  • Estimates ranging from -$176m to +563m; data due tomorrow, no time specified
• Related data may show decline in exports slowed to -14.90% y/y from -20.72% in Jan., while imports seen falling at a slower pace of -11.46%
• Indonesia posted first trade surplus in three months in Jan., data released on Feb. 15 showed; USD/IDR fell 0.8% to close at 13,383 on that day; FX pair now at 13,027
• Related story: Indonesia plans stricter rule on lumber product exports to pave way for easier process for such exports to EU, Kontan reports