Halister News

Economic Release Details: {EMPRGBCI Index ECOD} --VINCE GOLLE

(Bloomberg) -- General business conditions index seen at -10 in Feb. vs -19.37 in Jan. (forecast range -16 to -5); diffusion index represents percentage of respondents indicating an increase minus percentage indicating a decrease.

• Jan. reading was lowest since March 2009; last positive reading was in July

(Bloomberg) -- “The biggest question for us now is whether it is safe once again to implement fundamental strategies or whether rates markets are still in the throes of a squeeze,” and “though the influence of other markets (like energy) is undeniable, we still believe that there is a risk that positioning is offsides,” BMO strategist Aaron Kohli says in note.

• “Latest data suggests some closing of shorts in the FV, which is somewhat encouraging, but the rates market as a whole still appears vulnerable to short squeezes”
• “Frenzied pace of buying we saw last week has diminished and may give us an opportunity to see a small reprieve and an accompanying selloff in rates,” and “5s and 10s will be the weakest points on the curve on a relative basis once shorts are fully washed”
• Other observations from strategist morning notes:
• CRT (David Ader): “We are retaining our bearish bias on the Treasury market, although the strong support at 1.80% makes it an obvious key support level in a more significant downtrade this week”
  • “Given the conspicuous absence of corporate deal pricings last week, yields could still face an upward bias based on flow influences”
  • “We’re cognizant that a frozen investment grade new issue market is one of the types of tightening in financial conditions that would get the FOMC worried about the functioning of capital markets more broadly, so a reluctance of borrowers to return to the market this week might change a flow concern into a more systemic policy issue”
• Hilltop Securities (Mark Grant): “These days, there is China and oil and then there is everything else. One you can’t trust, and the other is a forgone conclusion”
  • “Both are troubling and both are causing great volatility in the markets because so much incorrect data is put out about both subjects and because so many vested interests are rigorously plying their wares”

Information from person familiar with the matter, who is not authorized to speak publicly and asked not to be identified. --GREG CHANG

(Bloomberg) -- No longer expect Fed to hike in 2016, while ECB and BOJ will probably venture even deeper into negative rates, ABN Amro economist Nick Kounis writes in client note.

• Previously expected Fed to raise interest rates again in June and 3 times in total this year
• Change in view due to downgraded global economic growth forecast, more pessimistic global economic outlook
• Expect ECB to step up its monetary stimulus more significantly by cutting deposit rate by 40bps to -0.7% over coming months vs 20bps cut previously
• Reductions likely to take place in two steps of 20bps, in March and June
• Still see ECB stepping up of QE by EU10b per month
• See now bond yields to stay lower for longer and less dollar strength
• See EUR/USD at 1.05 vs prev. 1.00 at year end
• NOTE: RBS, JPMorgan expect deeper ECB deposit rate cut this year