Halister News

(Bloomberg) -- A Tory government that’s weaker than the current one would be the riskiest U.K. election outcome for investors, according to Mike Amey, head of sterling portfolio management at Pimco Europe.

• Gilt yields look “rich” compared with those on U.S. Treasuries, he wrote in a client note Friday, adding that that view was based more on the “resilience of the economy rather than a view on the electoral outcome”
• Given the lack of market volatility and clarity, Amey said he doesn’t “believe investors are being adequately compensated to take risk associated with the outcome of the election”
  • If there is market volatility, Amey said investors are likely “better served by having scope to respond rather than by taking a view ahead of the event”
• Below are the potential market reactions to different U.K. election outcomes, according to Amey:
  • Larger Conservative Party majority in Parliament, “should elicit little market response” as it’s the central expectation
  • A Labour-led government, although unlikely, will spur currency volatility and higher yields in long-dated gilts
    • The initial reaction could be for the pound to fall as the focus would be on “looser fiscal policy and an untested government” 
    • But if the looser fiscal policy is accompanied by tighter monetary policy and a stable government, “then it is quite possible that in time the pound responds more favorably”
  • A weakened Conservative government would be the “most politically challenging outcome and would almost certainly send the pound and gilt yields lower,” Amey writes
    • Investors would likely immediately worry about a “challenge” to Prime Minister Theresa May’s leadership of the Tories
    • Concern that a greater reliance on every Conservative member of Parliament “risks a more confrontational approach to Brexit negotiations”

--With assistance from Cecile Gutscher. To contact the reporter on this story: Anooja Debnath in London at adebnath@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma

(Bloomberg) -- U.S. Treasury yield forecast is revised lower “with risks tilted to the downside,” based on lower expectations for tax cuts and other pro-growth policies, slowdown in core inflation and market-implied skepticism that Fed can raise rates more than once next year, Societe Generale strategists led by Subadra Rajappa say in note.

• Soc Gen still expects “modest rise” in yields this year driven by possibility of Fed rate hikes, balance sheet normalization and potential for ECB tapering
• Firm recommends neutral duration stance near term, bearish tilt medium term

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Jenny Paris

(Bloomberg) -- Banks are required to report information of clients’ overseas transactions more than 1,000 yuan per deal and cash withdrawals on daily basis from Sept. 1, State Administration of Foreign Exchange says in a statement.

• Move aims to prevent cross-border money laundering and other crimes
• Link to Statement:Link

(Bloomberg) -- Standard Chartered changes 3-month outlook for govt bonds to positive from neutral and recommends investors buy 6-year securities, analysts including Nagaraj Kulkarni write in note.

• Recommends buying 6.84% 2022 govt bond FX-unhedged at current yield of 6.75%, with target of 6.40% and stop-loss of 6.95%
• Sees value in 5-to-8-year sector of yield curve, will look to increase duration at appropriate time
• Expects monetary policy committee to scale back hawkishness at June meeting, and lower rates by 25bps in August
• Would have preferred to go long bonds in 10-to-15-year segment, but they have rallied ~30bps since April, with curve bull flattening
• Forecasts 6.60% yield on new 10-year govt bond by end-September, versus 7.20% previously; 6.60% yield by end-March 2018 versus 7% previously

To contact the reporter on this story: Subhadip Sircar in Mumbai at ssircar3@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Nicholas Reynolds