Halister News

(Bloomberg) -- Previous projection of Banco Fator for next Brazil Central Bank meeting was of a 75-bps cut in Selic rate, chief economist Jose Francisco Goncalves says in phone interview.

• Selic rate likely to end Oct. at 8.25% and remain at that level until end of 2017
  • Previously, Banco Fator projected Selic at 8.50% by year end
• Inflation continues to surprise favorably; there is a very favorable outlook, Goncalves says
• Banco Fator’s projection of IPCA inflation index at 3.65% by end of 2017 will be revised downwards
• There is a major worsening in political uncertainty, but BRL has been close to 3.30/USD, suggesting that it is possible that FX rate will drop somewhat if there is a more positive routing on the political issue

Original Story: Fator vê corte de 1 pp em julho, Selic a 8,25% no fim de 2017 To contact the translator on this story: Danielle Chaves in Sao Paulo at djelmayer@bloomberg.net Reporter on the original story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net Editors responsible for the original story: Daniela Milanese at dmilanese@bloomberg.net Taís Fuoco

--DEREK WALLBANK

--DEREK WALLBANK

--DEREK WALLBANK

(Bloomberg) -- Auction supply next may total EU15b, offset by EU12b in redemptions from Netherlands. Net supply for the month, when including QE flows, remains very negative.

• Main central bank event for the week is Yellen’s Monetary Policy report to Congress, with initial text release due at 1:30pm London time on July 12; U.S. CPI due on Friday is the key data point
• For the U.K., only tier 1 release is the labor market report on July 12
• The supportive cash-flows environment for EGBs through July has been widely highlighted. With and estimated EU42b of QE buying, EU114b in redemptions (highest in 2017) and EU33b in coupons, leaving a large negative cash requirement of around EU122b, according to Citigroup
• Portugal is said to delay its usual supply announcement window from 1pm London to 4:30pm, meaning a Portugal auction may be added to the next week’s supply
• SUPPLY/REDEMPTIONS: Auction supply may total EU15b, equivalent to around EU14m/bp or 96,000 bund futures in risk terms
• July 11: Netherlands to sell 2.75% 01/2047 for EU0.75b-1.25b
• July 12: Germany to sell new 08/2027 for EU5b
• July 13: Italy to sell bonds; expected 0.35% 06/2020, 1.85% 05/2024 and long-dated sale for up to EU8b, says Citigroup
• July 13: Ireland to sell bonds; Commerzbank look for 0.8% 03/2022, 1.7% 05/2037 for up to EU1b
• There’s EU12b of old Dutch 10-year bonds maturing on July 15, which may be reinvested, which may be reinvested late next week due to T+2 settlement
• U.K. mandated banks for a tap of 0.125% 2056 gilt linker during week commencing July 10; funding plans suggest GBP4b size, however DMO retains flexibility on upsizing, possible to see a deal size up to GBP5b, depending on the end-user demand, writes RBC in a client note
  • A deal size of GBP4b, would equate to GBP29m/bp in risk terms, or 263,000 gilt futures
• NOTE: Auction calendar is ECO20 WE

To contact the reporter on this story: Stephen Spratt in London at sspratt3@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Keith Jenkins

(Bloomberg) -- Greater job creation in U.S. reflects growth, while weak wages show “firms are not yet allowing” the labor force to reduce margins and that should lead to “higher profitability,” Nomura analysts led by Jordan Rochester write in July 7 note.

• There shouldn’t be too much impact on timing of Fed balance- sheet reduction or lead to “fresh impetus” on USD selling in USD/JPY
• Market’s initial reaction to buy EUR/USD on dip given that numbers are “good for growth,” ECB normalization is “a far more potent animal at these levels” is “something we would agree with” 
• “Modest” rise in avg hourly earnings suggests “capacity constraints are not a near-term issue”  
  • Each 0.1 weakness in AHE worth 2-3 bps on 10s, so rally is “fair”
• Data should be good for risk if rates incorporate numbers as volatility “suppressant” on higher yield trajectory
• Canadian numbers surprise on upside in “surprisingly impressive” separate jobs report, +45.3k vs 10k expected, unemployment declined to 6.5%; USD/CAD moving lower on “strong numbers” ahead of next week’s BOC meeting
  • Nomura expects hike at BOC meeting, is “cautious on chasing USD/CAD lower” due to high risk of “dovish tone relative to the market pricing”

To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Vivien Lou Chen