Halister News

(Bloomberg) -- Debt dynamics likely to worsen in 2016, suggesting further ratings downgrades in region, Barclays strategists Andreas Kolbe, Ridle Markus say in weekly emerging markets report.

• Zambia, Gabon, Angola, Nigeria, Mozambique, Cameroon at risk of further negative rating action; Senegal, Rwanda, Ivory Coast well placed to maintain ratings “at very least”
• Commodity price slump means financing needs increase, should result in rise in supply from continent
• Less ample liquidity, challenged fundamentals means issuers will likely need to offer sizable new issuance premia to attract demand; likely to pressure spreads in secondary markets
• Recommends buying Ethiopia’s 2024 bonds; recent underperformance is overdone, offers value relative to peers, opportunity to add
• Sub-Saharan Africa 2016 GDP to avg 3%, vs 2.8% in 2015; Senegal, Ivory Coast, Ghana likely to produce strong growth rates: Barclays
• Recommends exposure to Ivory Coast, Senegal, Namibia; positive on Ghana from M/T risk/reward perspective
• Namibia’s underperformance not justified fundamentally; continue to see current spread levels as an opportunity to add to exposure: Barclays

(Bloomberg) -- Current environment requires further caution on “buy-the-dip” mentality in peripherals; maintain neutral view on EUR duration and turn neutral on peripheral, semi-core spreads given poor risk/reward, writes Barclays strategists led by Cagdas Aksu in a client note.

• Neutral on EGB spreads given poor global macro backdrop, reduced market impact of further ECB easing, domestic political risks, market positioning
  • Pressure in credit markets means periphery paper more likely to be used as macro hedging tool; price action, rising open interest suggests this is happening in BTP futures
• Remain neutral EUR rates duration; bunds look towards rich end of range, though current resilience in duration unlikely to reverse quickly unless the macro outlook changes convincingly

(To subscribe to EU Credit Daily, click here and set alert via ‘"Display & Edit’’) By Simon Ballard (Bloomberg) -- As iTraxx Crossover flirts with 500, after surpassing the psychological 400 level just a week ago, it remains comfortably below the historic Feb. 2009 high of 1084. Credit markets are unsure whether Armageddon has been avoided or just delayed this week though; no wonder investor sentiment is cautious at best, Bloomberg strategist Simon Ballard writes.

• Notwithstanding market volatility and spread weakness as Fed and global macro fears persist, it remains to be seen if the damage is below the waterline and fatal
  • The EUR primary space continues to show signs of life, although the market is currently the reserve of top- rated issuers prepared to pay up
• Risk Appetite Model begins to pare recent improvements as investor caution rises on flight to quality trades

• CDX IG currently -0.7bps at 125.20 in overnight session; iTraxx Asia Ex Japan IG currently +0.4bps at 177.959

NEWS

• Corporate News
• Rolls-Royce Makes First Dividend Cut Since 1992 as Crisis Mounts
• Renault Profit Surges 44% on European Demand for Kadjar SUV

• Financial News
• Deutsche Bank Ranks Last on Capital Gauge Where Citigroup Excels
• Commerzbank Swings to Profit, Led by Consumer Bank Profit Surge
• UBS Wins Lawsuit Against Singapore Private Wealth Client Tan

• Rating News
• Deutsche Bank CoCo Ratings Cut by S&P on Earnings Uncertainty
• Moody’s Concludes Reviews for 11 Us Ba-Rated E&P Cos.

• Other News
• Five-Decade Market Pro Who Called Bond Rally Sees 1% U.S. Yields
• Oil Rebounds From Lowest Close in 12 Years as Volatility Surges

ANALYST VIEWS

• Markets are likely to remain volatile near term; though selloff feels overdone, sentiment in bank credit is likely to be hostage to ongoing weakness in bank equities: Barclays
• Current volatility not the onset of some new crisis but rather a painful part of a normalization, with which the Fed intends to persist: CS
• X-Over heading to 500bps isn’t good, but it isn’t capitulation. Credit spreads going higher isn’t capitulation either: creditmarketdaily.com
• Dynamics are very negative right now, and with every further blow, negativity is gaining momentum. This is made painfully clear by HY fund flows: Commerzbank

NEW ISSUES

• PRICED: Hamburg EU500m 4Y FRN 3mE +1
• POSTPONED: Leaseplan EU1.5b Equivalent 3-Part Notes
• 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) -- Ringgit reverses earlier gain, slides 0.5% to 4.1660 per dollar, swept up in broad dollar buying versus Asian currencies

• USD/MYR on track to finish the week above 38.2% Fibonacci retracement of trading range since May; October was the last time this happened, as this chart shows
• Pivot point at 4.1333; USD/MYR support at 4.1126, 4.0793, 4.0253; resistance broken at 4.1666 and 4.1873, above at 4.2413
• Palm oil rises to 21-month high as stocks decline on El Nino
• Malaysia to sell MYR4b 7.5-year bonds on Feb 16
• Goldman Sachs forecasts USD/MYR at 4.60 in 3-months, 4.65 in 6-months and 4.70 in 12-months
  • Sees headwinds from further commodity price weakness, a slowdown in Chinese demand, U.S. rate normalization, governance issues at government-linked entities
  • Calls currency one of the most vulnerable in EM space
• Ringgit 1-mo. NDF drops 0.7% to 4.1653
• Brent crude up 3.5% to $31.11
• Yield on 3.955% govt bond due Sept. 2025 up 1 bp to 4.063%