Halister News

(Bloomberg) -- An electoral upset in the U.K. with Labour Party winning could be bad for gilts and good for the pound as that may lead to austerity being removed and borrowing boosted, according to Nomura strategists led by Jordan Rochester.

• While unlikely, tightening polls mean that a victory for Labour leader Jeremy Corbyn is not entirely implausible
• Higher gilt yields “are the obvious conclusion” as fiscal easing lifts growth and inflation expectations; bond issuance increases; and the chances of a hard Brexit or cliff-edge scenario are reduced, the strategists write in a note to clients
• The pound may suffer initially on the surprise of a left-leaning government gaining power and investor expectations of increased deficit financing
  • But higher real yields resulting from tighter BOE policy and hopes of a soft, or no, Brexit, should eventually support the currency
• NOTE: Pound falls on tighter polls as traders wake up to election risk

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma

Economic Release Details: {TWGDCONY Index ECOD} --ADELA LIN

(Bloomberg) -- ECB is set to end QE purchases in 2018 despite the market already telling us that higher inflation isn’t sustainable, which implies QE taper locks in lowflation just as Fed hikes do the same in the U.S., Citigroup strategists including Jamie Searle write in a client note.

• These inflation dynamics could easily dominate valuations, and therefore the end of QE purchases may turn out to be bullish for bunds, surprising the bearish consensus
• Flash estimate for HICP in May is likely to see some reversal of the Easter-related distortions; headline can fall back to 1.5%, core to 1.0%
  • Market still believes that headline inflation will fall back to 1%-1.5% range and stay there for the next few years, which is inconsistent with a sustainable return to the inflation target
• Expect 10y bunds to average around 35-40bps for the rest of this year and into early-2018, despite looming ECB taper; this is well below consensus which looks for 0.75% by year-end, 1% in 2018

To contact the reporter on this story: Stephen Spratt in London at sspratt3@bloomberg.net

(Bloomberg) -- Passengers carried rose 12.9% to 3.57m in 1Q from yr earlier, airline says in emailed statement.

• 1Q Load Factor at 79.4% vs 68.9% Y/Y
• Yields lower due to intense competition and price war
• Sees 45% improvement in forward bookings for next 6 months from June to Nov. compared to same period in 2016
• Rapid expansion in international sales requires additional widebody aircraft in 2018 and 2019 to address profitable demand; co. exploring options for planes for possible delivery in 2018 and 2019
• Co. in talks with Airbus on A330neo and Boeing on 787-9 for direct purchase or lease
• Co. has firm order for 25 Boeing 737 MAX-8 planes with delivery from 4Q 2019; model anticipated to be game changer on costs for Malaysia Airlines
• Co. maintains cautious outlook for 2017; on track for profit in 2018
• A more aggressive price war on domestic market has happened earlier than initially predicted; weak ringgit and increased fuel price put pressure on cost
• Advance bookings far stronger in 2017 than 2016, but airline is seeing yield pressure across all routes
• Malaysia Airlines’ market is diverging with consistent growth and improvement on international services, but is losing market share domestically where fares are increasingly low: statement

--PENNY PENG