HALISTER1: Brazil Scraps Rate Hike Bets on BCB’s Optimistic Views: Haitong

Brazil Scraps Rate Hike Bets on BCB’s Optimistic Views: Haitong

(Bloomberg) -- Swap rates mkt cutting bets on Selic hikes reflects divergence between BCB views on inflation and fiscal policies and more skeptical investor assessments, Flavio Serrano, economist at Haitong says in a phone interview.
  • NOTE: Rate hike priced in on DI curves dropped to 5.87bps from 11.61bps on Friday
  • BCB holds premise poor activity will have a deflationary impact, that govt will meet budget surplus goal; mkt skepticism has proven to be more realistic in recent years, Serrano says
    • Serrano sees CPI at 6.9% in 2016, over the 4.5% +/-2ppt target, and 5.7% in 2017, near high end of target, as next year the range of target will narrow to 1.5ppt from 2ppt
  • NOTE: BCB said in its inflation report, released in Dec., that CPI could slow to 6.2% in 2016 and 4.8% in 2017; in last minutes, it said that, in a relevant horizon, the fiscal policy tends to shift to neutral zone or even to a restraint area
  • CPI may slow as mkt sees a continued recession and smaller BRL depreciation in 2016; upside risks for inflation are the broad indexation of the economy and the deterioration in mkt expectations on fiscal policy, Serrano says
  • “As the economy remains indexed, the high inflation of 2015 will influence the number of 2016”
  • Serrano forecasts BRL at 4.40 in yr-end; sees BCB cutting Selic to 13.25% from current 14.25% by Dec.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Flavio Serrano (Haitong Bank SA)

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HALISTER1: RATES: BofAML Lowers End-2016 10Y Yield Forecasts

RATES: BofAML Lowers End-2016 10Y Yield Forecasts

(Bloomberg) -- UST 10Y yield forecast lowered from 2.65% “on the back of our economists’ change to 2 from 3 Fed hikes this year,” addition of “a significant risk epidsode of U.S. QE and our equity strategists’ revised forecasts,” BofAML strategists led by Shyam Rajan say in note.
  • BofAML also cut end-2016 forecasts for German 10Y yield to 40bp from 75bp, for U.K. 10Y yield 1.85% from 2.40%
  • While they expect “a near-term pullback” to 1.85% for UST 10Y yield, “in the bigger picture much damage has been done”
  • Market now expects 4 hikes by 2020, and forward curve flatness and forward inflation expectations “send a far more pessimistic message this time” than in April 2013, when 10Y last reached these low levels
  • “Many things need now need to go right” for market to come close to pricing in hikes “as envisioned by the consensus and the Fed”
  • Related story: Latest End-2016 UST 10Y Yield Forecasts 1.75%-2.75%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER1: U.S. ECO PREVIEW: Industrial Production Due in 5 Minutes

U.S. ECO PREVIEW: Industrial Production Due in 5 Minutes

(Bloomberg) -- Output of factories, mines and utilities seen rising 0.4% in Jan. after falling 0.4% in Dec. (forecast range -0.2% to +1%); capacity utilization rate seen rising to 76.7% from 76.5% in Dec., lowest since July 2013.
  • Industrial production last increased m/m in Aug.; it fell 1.75% y/y in Dec., lowest rate since Dec. 2009
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER: Apple Opposes Order to Unlock San Bernardino Shooter IPhone (1)

Apple Opposes Order to Unlock San Bernardino Shooter IPhone (1)

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
AAPL US (Apple Inc)

People
Timothy Cook (Apple Inc)
Donald Trump (Trump Hotels & Casino Resorts Inc)
Eileen Decker (United States Department of Justice)
James Comey (DOJ United States Federal Bureau of Investigation)
Sheri Pym ((US)Dist Court:)

Topics
BGOV Tech/Telecomm
Bloomberg Politics

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UUID: 7947283

HALISTER1: UST MORNING CALL: Overbought Momentum Being Worked Off

UST MORNING CALL: Overbought Momentum Being Worked Off

(Bloomberg) -- In today’s FOMC minutes, “the market is going to be looking for a sense of capitulation that would confirm the current pricing of no hike in March,” BMO strategist Aaron Kohli says in note.
  • “This week’s key data raises the stakes for the Fed,” as “they need the data to continue to show strength, or it risks bringing into question that the December hike was an error”
  • “Price action in the long end of the UST curve has turned bearish over the past four sessions,” while “momentum is trending out of overbought extremes and signaling a move to higher yields”
  • Other observations from strategist morning notes:
  • CRT (Ian Lyngen): “Overbought momentum in Treasuries has begun to work itself off as yields retraced off the lows and we’re left with the obvious concern that the correction has run its course”; however, “we’re retaining our bearish bias for the time being, with an acknowledgment that higher yields are becoming more difficult to achieve and warrant further impetus –- most likely in terms of the data or price action in other assets”
    • “As we contemplate the day ahead we’re reminded that the return in corporate deal pricings had an impact on the Treasury market yesterday,” and “while we’re not expecting a repeat in the size of deals today, we understand from those who more closely follow the market that the deal calendar is building”
    • FOMC meeting minutes release “holds the potential to deliver some tradeable headlines in light of the policy- driven nature of the recent leg higher in this most recent rally”
  • FTN (Jim Vogel): “Tuesday produced a mild bear steepener on the Treasury curve, and 10-yr UST can trade above 1.82% today before the FOMC minutes”; next battleground “will be around 1.85% (or below 1.74%),” and “one reason for the steeper curve is the $18b in 10-yr equivalent duration sold by high grade U.S. corporate issuers”
    • “One economic consequence of market disruption is that huge players like Apple see it in its better interest to issue $12b in debt to fund capital returns to shareholders in a down stock market (in effect buying its own stock at a depressed price) than to invest in near-term growth,” and “such developments are nothing new, of course, but they do help perpetuate the pricing power of dominant multi-nationals (read: low inflation)”
    • “Watch for a small overreaction to this afternoon’s FOMC minutes,” as “the Fed was likely still in stark denial about global financial conditions at the end of January”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Aaron Kohli (Bank of Montreal)
Ian Lyngen (CRT Capital Group LLC)
Jim Vogel (Ftn Financial)

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