Halister News

(Bloomberg) -- France to sell 1.75% 05/2023, 0.5% 05/2026, and 1.5% 05/2031 for EU8b-EU9b at 10:50am CET. Analyst views on the auctions are mixed, though they cite recent redemptions, ECB outlook and dealer demand as likely sources of support.

• HSBC (Theo Chapsalis)
  • New 10Y France sits a touch rich on the roll, though it can stay rich as it falls into June OAT future delivery basket
  • Front-end core bonds have dropped further below ECB depo rate, removing QE eligibility; central banks will need to push further up the curve to duration securities, which should flatten curves
  • EU25b in BTAN redemptions paid on Feb. 25 should support; recommend extending out of FRTR 11/2018s into new bond, or buying cross-market vs Germany

• Mizuho (Antoine Bouvet)
  • 7Y issue is particularly expensive on 5s7s10s; auctions to help cheapen the bond as repo is eased; current 10Y (11/2025) losses benchmark discount
  • 15Y bond trades more than 30bps expensive vs peers in repo, suggesting strong short base among dealers; auction to be supported by short-covering demand

• Barclays (Huw Worthington)
  • New 10Y trades ~8.5bps cheap vs old benchmark, in line with recent discounts; after recent underperformance vs Belgium, now offers attractive yield pick-up of ~4bps
  • 15Y has cheapened modestly vs peers though still looks expensive; has seen small cross-market cheapening vs Belgium
  • 7Y issue has built in meaningful concession, moving from expensive to cheap lvls on the curve; expect the auction to be a dealer event, should be well-supported

(Bloomberg) -- Rupee advances, heading for a fifth straight gain, which would be longest stretch this year.

• IMF warns RBI’s Rajan that he may need to raise rates to counter inflationary risks, in a Jan. 27 report that was released late yesterday; 12 of 16 analysts surveyed by Bloomberg soon after nation’s budget said they expect Rajan to lower the benchmark repurchase rate before April 5 review
• Budget was positive surprise for rates markets, Nomura writes in note yesterday; expects bond curve steepening to persist though as end of easing cycle is approaching; prefers sub-10-year part of curve; recommends to stay long 8.27% 2020 sovereign bonds
• Rupee up 0.3% to 67.3275 per dollar; USD/INR’s 14-day RSI at 36, falling toward oversold territory
• Results of RBI’s 120b rupee ($1.8) open market debt purchase awaited
• Foreign investors bought net $442.7m of local equities on March 1: exchange data; they bought net $3m in local debt on that day: NSDL
• ‘Others’ category was biggest buyers of govt debt at 12.1b rupees on March 2; primary dealers were biggest sellers at 5.9b rupees: CCIL data
• Yield on 7.59% govt bond due Jan. 2026 up 2 bps to 7.64%

(Bloomberg) -- Spain Feb. services PMI est. 54.0, prev 54.6.

• Spain Feb. composite PMI est. n/a, prev 55.3

(Bloomberg) -- Link

(Bloomberg) -- Russia’s corporate Eurobond curve is much steeper than sovereign curve, leaving room for spread compression, especially in O&G bonds due 2020-2023, Bank of America analysts Kay Hope and Ali Dhaloomal say in note to clients.

• Recommends Overweight on KazMunaiGaz Eurobonds due 2018-2023
• Recommends moving from Gazprom 2019 bonds into KMG 2021 bonds
  • Moves Gazprom 2019 recommendation to Underweight from Marketweight
• Recommends switching from Gazprom 2018 to Gazprom July 2022 bonds
• Recommends switching from Rosneft 2017 into Gazprom 2020 bonds
• NOTE: BofA commodity teams sees oil at $47/bbl by end-June

(To subscribe to EU Credit Daily, click here and set alert via ‘"Display & Edit’’) By Simon Ballard (Bloomberg) -- Tightening of cash bond spreads contrasts with failure of synthetic indexes to hold onto tighter lvls, Bloomberg strategist Simon Ballard writes.

• Cash bond spreads ratcheting tighter continue to highlight the buy-and-hold nature of the asset class, as well as perhaps the steady decline in secondary credit mkt liquidity; synthetic indexes fail to hold onto tighter lvls - closing Wednesday around the day’s wides, which underscores the degree of caution embedded in investor sentiment

• Asian equities extending gains overnight should help cash credit spreads maintain the tightening bias shown Wednesday
  • Aggressive additional easing from the ECB next week would be a further fillip for risk appetite
  • Lack of non-financial corporate issuance may also reflect issuer and investor uncertainty over macroeconomic and rates outlook
• Risk Appetite model reflects strong underlying demand for spread product, notwithstanding current caution over macro, rates outlook

• CDX IG currently -0.8bps at 100.06 in overnight session; iTraxx Asia Ex Japan IG is currently -1.7bps at 151.55

NEWS

• Corporate News
• Ahold Earnings Beat Estimates on Revamp in U.S., Netherlands
• Travis Perkins 2015 Sales Rise 6.5%, Lfl Rev. Up 3.8%
• Cobham 2015 Adj EPS Misses Est.; Sees Stable Trading in Defense
• Whitbread 4Q Premier Inn, Costa LFL Sales Miss Ests.
• Adidas Sees 10% to 12% Earnings Growth as Consumers Spend More
• Delhaize Dividend Tops Ests.; 2016 Capex Seen Rising to ~EU825m

• Financial News
• Standard Bank Full-Year Profit Rises 34% After U.K. Disposal
• Schroders FY Adj Pretax Tops Est; Dobson to Become Chairman
• Allied Irish Banks 2015 Pretax Profit EU1.9b, Up 72% Y/y
• Bawag 2015 Net Income Rises 26% to EU418m; Proposes EU325m Div.
• SNS Bank Says 2015 Profit Ex-Items Rose to EU335m From EU294m
• Deutsche Bank Veterans Nichol, Torres Said Poised to Depart

• Rating News
• Moody’s Shifts to Negative Outlook on 25 Chinese Financial Firms
• Moody’s Takes Rating Actions on Five Omani Banks, One Finance

• Other News
• Pimco’s Inflation Call Is Paying Off, Whatever Dudley’s Concern
• Negative Rate Abyss Is Here as Denmark Prepares for Next Round

ANALYST VIEWS

• The uptick in supply of late has managed to inject a bit of liquidity into the corporate bond market, but we need to see it keep coming to maintain the edge this market has right now: creditmarketdaily.com

NEW ISSUES

• United Overseas Bank EU500m 5Y Cov MS +32
• Sparebank 1 Boligkreditt EU1B 7Y Cov MS +23
• Swedbank EU400m 3Y FRN 3mE +45
• Motability Operations GBP600m 20Y UKT +155
• Belfius Bank EU500m 6Y Covered MS +17
• Nestle $400m 5Y MS +72
• Grenke Finance EU125m 4/2021 at 1.55%
• 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) -- Spain to sell 0.75% 07/2021, 1.95% 07/2030 for EU3.5b-EU4.5b, as well as 1.8% I/L 11/2024 for EU250m-EU750m, at 10:30am CET. Analysts say new 5Y bonds look expensive on the curve, though they still have scope for further outperformance given the outlook for the ECB.

• Societe Generale (Marc-Henri Thoumin)
  • New 5Y SPGB offers less generous pick-up than current 5Y; prospect of further ECB easing favors outperformance of 5Y sector relative to the curve, may support the sector until central bank meeting next week
  • SPGB 15Y has seen a bout of pre-auction cheapening in the sector; 10s15s looks steep vs BTP, expect some convergence after the auction

• Barclays (Huw Worthington)
  • 5Y trades on rich side compared to recent benchmark discounts; cross-market has widened sharply vs Italy, though has partly retraced; still offers double-digit yield pick-ups
  • Spain 15Y trades at 6-month cheaps on the curve after recent ~2bps of underperformance vs peers
  • On the curve 10s15s30s, 15Y sector has cheapened by ~4.5bps over past week; cross-market has widened by 5bps vs Italy over past week

• Mizuho (Antoine Bouvet)
  • New 5Y Spain should come ~2bps expensive relative to the curve
  • 15Y issue is most expensive on Spanish fitted curve, largely due to lack of low-coupon issues in long-end Spain

• Commerzbank (David Schnautz)
  • Tesoro likely to keep size toward middle of range, allotting ~EU3b to new 5Y bond
  • Grey market valuations look around fair value on curve; still neutral on Spain/Italy spreads, given political, banking issues