Halister News

(Bloomberg) -- "We believe that the government has decided to use the grace periods for all coupon payments in order to ensure that it has the resources available to make the amortization payments, for which there is no grace period," Torino chief economist Francisco Rodriguez writes in report.

• The most important driver of the opposition’s loss in gubernatorial elections appears instead to be inability to get out its voters
• Of Venezuela’s external obligations, 39% are in bonds and promissory notes, 21% in multilateral and bilateral loans and another 21% in trade credits and arrears: Torino
  • Variety of creditors allows the country to contemplate diverse strategies
• Current administration appears to privilege NY-law bondholders, renegotiate with bilateral creditors, and forcibly restructure others
  • "That strategy seems to privilege the creditors that have greater power to enforce their claims in international courts and more difficulties in solving collective action problems. One could imagine that, even in a more orderly restructuring strategy, a similar scheme of prioritization could be maintained"
• NOTE: Venezuela’s Behind on Its Debt and Facing Two Huge Payments

To contact the reporter on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Ney Hayashi

(Bloomberg) -- Approval of pension reform before 2019 is "impossible", given tight schedule, government’s fragility and highly unpopular topic, and Michel Temer’s administration could try to focus on the progress of tax reform, Sergio Vale, chief economist at MB Associados, says in a telephone interview.

• Effort for pension reform approval would be in vain while there is room for tax reform to be approved in 2018
  • Tax reform has no popular resistance and the government could put it into discussion for approval next year, since it wouldn’t affect legislators’ electoral life, sending positive signal to the market
• Pension reform "won’t happen now," should happen only in 2019
• NOTE, earlier: Major Pension Reform in Brazil Is Unlikely: Moody’s
• NOTE, on October 19: Last Chance Looms for Brazil Key Pension Reform: Analysts Original Story:

MB/Vale: Governo pode mudar foco de Previdência para tributária To contact the translator on this story: Taís Fuoco in Sao Paulo at tfuoco1@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 Giulia Camillo

(Bloomberg) -- Near-term positioning views on USTs take into account potential for reflation trade domestically and ECB tapering to push yields above levels that have provided major support, including 2.40% for 10Y.

• Nomura (strategists led by George Goncalves, Oct. 20 note)
  • UST 10Y yield is likely to top 2.40% as reflation trade gathers pace; 5Y yield over 2% is encouraging in that vein
• Barclays (strategists led by Rajiv Setia, Oct. 19 note)
  • Recommends tactical short in German 10Y into Oct. 26 ECB meeting, and “any selloff in Europe should translate over to other DM rates”
  • Also recommends being long Apr18 vs Jan18 fed funds, with March hike odds of 40%-50% possibly too high
• SocGen (strategists led by Subadra Rajappa, Oct. 19 report)
  • Global policy re-coupling “is likely to slowly pressure term premiums higher”
  • Maintains bearish steepening bias and preference for positions that carry positively, including 2s10s steepeners via 3m or 6m forwards
• BofA (Shyam Rajan, Oct. 20 note)
  • Rates market “sending opposite signals” as short end “is optimistic,” while long end “has never been more pessimistic”; flattening in intermediate to long end “is sending a clear end-of-business-cycle message”
  • Problem with disconnect is “rarely has the longer-term outlook been more dependent on the short term,” especially fiscal developments
  • Recommended trades include 2s5s and 3s7s steepeners, and 30y swap spread wideners in case curve flattens further
• Deutsche Bank (strategists led by Stuart Sparks, Oct. 20 note)
  • “We expect market pricing to converge to levels consistent with a positive real short rate” at end-2019 as inflation returns to Fed’s target
  • Term premium remains depressed because of robust demand from external reserve managers and domestic pension managers; restoration “is 2018’s business,” may occur as ECB taper reduces foreign inflows
• JPMorgan (strategists led by Jay Barry, Oct. 21 note)
  • UST valuations look attractive following last week’s selloff; however, “near-term risks around the ECB are bearish, positions are closer to neutral,” and Fed chair decision looms so remain neutral on duration
• TD (strategists led by Priya Misra, Oct. 20 note)
  • Longer-dated U.S. real rates “have risen too much recently” as no steps have been taken to raise long-term growth potential; set long U.S. 5y5y vs German 5y5y at 156bp, target 110bp, stop at 180bp
  • Separately, nominal 10Y yield is about 20bp below its December 2016 peak driven by term premium; rebound in global foreign exchange reserves led by China may be responsible
• Citi (Jason Williams, Oct. 20 note)
  • Non- commercial net short in TU futures “has materially increased over the past few weeks,” representing “a strong bullish risk to the front end”
  • New spec shorts “are likely to be outright duration expressions, perhaps driven by expectations around the next Fed chair,” as opposed to basis trades; TU CTD matched maturity OIS swaps haven’t increased

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net Vivien Lou Chen