Halister News

(Bloomberg) -- U.K.-Germany 10-year yield spread is ripe to reinstate compression trend from Dec. 2016 after the late May corrective widening fails at the stiff 77-79bps resistance, Bloomberg technical analyst Sejul Gokal writes.

• See chart here; spread now at 73bps
• Widening this week has faltered at the confluence hurdle area at 77-79bps, which is the 55-DMA, cloud base and May peaks
• Momentum valuations have reset to neutral, allowing for an impulsive spread-narrowing phase coming days; MACD has worked off stretched conditions and drifted to near the zero line
• Narrowing objective set at 66bps (YTD low) and 60bps (2016 low)
• A potential conservative majority could raise uncertainty and concerns over a hard Brexit deal, supporting gilts and weighing on gilt-bund yield spread, especially if ECB signals to the market its intention to taper its QE
• Risk factors:
  • Spread: Close above 78bps
  • Political: U.K. election upset could spur bond sell-off amid potential pick-up in gilt issuance

• NOTE: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- Raiffeisen Bank cuts recommendation on Czech local-currency bonds to hold from buy on a three-month horizon following the securities’ outperformance, as rise in German yields may weigh on rates markets and with further koruna gains seen limited, analysts Stephan Imre and Gintaras Shlizhyus write in report.

• See “some juice left” in long-maturity Hungarian, Polish bonds amid “goldilocks environment” after gains fueled by fading of reflation trade, market-friendly central bank accommodation
  • Reiterate preference for Hungarian, Polish debt over Romania where “patience of investors could start to wane mainly due to the elevated fiscal risks amidst an ambitious refinancing plan”
• In Eurobonds: 
  • Cuts Poland euro-denominated debt to hold from buy after reaching trade target vs Lithuanian debt
  • Raises Ukraine USD notes to hold from sell “to limit further losses” amid global emerging-market gains, even while it sees the nation as “one of the fundamentally weakest emerging markets”
  • Recommends buying Macedonia on political stabilization, swap from Serbia into Croatia USD notes due to relative cheapness of the Adriatic nation’s securities

To contact the reporter on this story: Marton Eder in Budapest at meder4@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma

--ARIJIT GHOSH

Economic Release Details: {INRPYLDP Index ECOD} --PRADEEP KURUP

Economic Release Details: {INRPYLDP Index ECOD} --PRADEEP KURUP

(Bloomberg) -- Raises South Africa to bullish, recommends buying 2030 government bonds in report dated June 7.

• “Despite political risks, confidence should be buoyed by the favorable macro backdrop,” HSBC strategists led by Steven Major, global head of fixed-income research, say in report
• Entered trade May 30 at 9.09%, target 8.48%, stop 9.62%
  • NOTE: Debt yielded 9% by 10:04am in Johannesburg
• “Weak growth and disinflation in the absence of any policy easing bias argue for a flatter yield curve”
• Risks: Any rise in political uncertainty
• HSBC view “looks through near-term political risk and focuses on fundamental value”; high carry, low volatility stay supportive of local-currency EM bonds
• “Local market volatility in Brazil and South Africa is likely to be contained and provide re-entry opportunities”
• HSBC also recommends 20-year Indonesia sovereigns, Brazil front-end receivers

Turned “mildly bullish” on Turkey, recommends 2- to 10-year cross-currency steepeners

• NOTE: S. Africa Has Second Recession in 8 Years as Economy Shrinks Link

Economic Release Details: {CNGFOREX Index ECOD}

(Bloomberg) -- EON, RWE and EnBW set to recover billions of euros in nuclear-fuel taxes after German top court strikes down law.

• Tax invalidated because federal government transgressed its powers: judges
• Federal Constitutional Court discloses ruling on website
• EON paid almost EU2.8b of nuclear fuel tax, RWE EU1.7b, EnBw EU1.4b
• Case number: BVerfG, 2 BvL 6/13

--TONY AARONS