Halister News

(Bloomberg) -- Michel Temer’s victory in Lower House on Wednesday, when legislators rejected corruption charge against the president, reduces political uncertainties and improves the prospect for the passage of pension reform, JPMorgan analysts write in note to clients.

• Brazil sovereign credit raised to overweight as near-term outperformance is likely given light positioning and spread valuations, which are still wider than pre-Temer corruption allegations
• Margin of Temer’s victory on Wednesday signals the government’s relatively solid position within Congress
• “We characterize our OW as tactical as a more concrete improving trajectory in fiscal and growth dynamics is needed to turn more bullish in the long run”
• NOTE: Brazil’s Temer Escapes Corruption Trial to Focus on Economy (4)

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net To contact the editors responsible for this story: Giulia Camillo at gcamillo@bloomberg.net Taís Fuoco

(Bloomberg) -- U.K. front-end rates may see buy-the-dip behavior with rate-hike pricing likely to be squeezed out of this year given the economy is still too fragile to sustain tighter financial conditions; downward revision of BOE’s optimistic GDP growth projections reflect recent soft data.

• Sonia MPC-dated forwards fully price the first 25bps hike now in Nov. 2018 vs August 2018 prior to the BOE decision, with Nov. 2017 now at 32% vs 47% prior to the announcement
• While Carney reiterated that the two hikes priced may be insufficient, trying to maintain two-way risk in front-end, any hawkish pushback against today’s rally may see buyers emerge on the dip given the growth downgrades, the softening of data and Brexit uncertainty
• Realized inflation prints from September into 4Q will confirm whether inflation is reaching its peak, and thereafter, is likely to fall sharply to below BOE’s 2% target in 1H 2018, given the absence of domestically generated inflation
  • There is room for the post-Brexit-vote rally in the inflation markets to fade further out the curve; see more here on inflation peak nearing given the faster pass-through from sterling’s post- Brexit fall
• The BOE re-investment of redemptions in week commencing Sept. 4 may be supportive for gilts and see a flatter curve driving an otherwise quiet summer market
• NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Tanvir Sandhu in London at tsandhu17@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma

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