Halister News

(Bloomberg) -- The U.K.’s current-account deficit may be about to get bigger, weighing on the pound, if internationally-focused companies follow BHP Billiton’s lead and cut their dividends, Deutsche Bank analysts Oliver Harvey and Robin Winkler write in client note.

• If dividend payouts continue to fall, GBP will start to feel the full brunt of the deterioration in the primary income account for the first time
• Financial services, mining and quarrying, information and communication, and petroleum and chemicals make up 73% of FDI assets held abroad; ONS data show they account for 84% of decline since 2011 in U.K. FDI earnings
  • But while profitability has fallen, dividend payments remitted back to the U.K. have been rising, suggesting saving decisions have mitigated the economic impact of the fall in FDI profits
• NOTE: Shell, Vodafone appear in screen for dividends at risk, Citigroup said last week; HSBC’s dividend increasingly at risk, Nomura says

(Bloomberg) -- “It’s possible that this week’s supply in Treasuries and in IG credit is keeping a floor under yields or perhaps some deep pockets are placing wagers that US yields are just too low given the fundamental backdrop of the US economy,” independent strategist Marty Mitchell says in note.

• “We are less certain that last week’s positive data is suggesting that the domestic economy has turned a corner and side with the multitude of headwinds that continue to percolate across the globe”
• Also, “central banks overseas have implemented negative interest rate policies” and “that dynamic should continue to attract capital to our shores and makes a 1.76% 10yr an attractive proposition”
• Other observations from strategist morning notes:
• BMO (Aaron Kohli): “Move in rates is consistent with last week’s better-than-expected January CPI data,” and “since then, the Treasury curve is steeper after some repricing to higher yields on the back of the improved inflation expectations”
• CRT (David Ader): “Return of corporate issuance is surely a relief for the Fed as it’s a signal that the tightening financial condition have reversed, at least a bit, and thoughts of a more typical market inspired the risk-on sentiment of the last several days”
  • “Influence of equities and oil on the Treasury market is beginning to wane, but what’s more likely is that the relatively subdued (and within-range) price action has failed to inspired any new trading direction”
• FTN (Jim Vogel): “Short-term maturities on the Treasury curve are vulnerable to more near-term flattening as long as oil slowly ticks higher”
  • “Interestingly, 7s to 30s are not yet vulnerable to newly visible short-run inflation,” and “some of the lag relates to the rising dollar -- or rather struggling currencies elsewhere -- while global snags become an increasingly important factor”
  • “If oil can stay in the $34-$35 area, look for 2-yr Treasuries to increase 5-8bp within less than a week, while 3-yrs can move toward 1.0%”

To contact the reporter on this story: Monika Grabek in New York at mgrabek1@bloomberg.net To contact the editors responsible for this story: Elizabeth Stanton at estanton@bloomberg.net

Economic Release Details: {HBBRANN Index ECOD} --ZOLTAN SIMON