HALISTER: Citigroup Says It Received Five-Year Volcker-Rule Extension

Citigroup Says It Received Five-Year Volcker-Rule Extension

(Bloomberg) -- Extension was granted on April 21, Citigroup says Monday in 10-Q filing
  • Firm can hold investments until the earlier of five years or the date they mature or become compliant
  • Company says it has $416 million in funds at net asset value, “some” of which are subject to Volcker limitations
  • Federal Reserve said in December it will grant such extensions, and it was widely anticipated firms would apply
  • NOTE: Banks Get Five Years to Meet Volcker Demand to Divest Funds

Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
C US (Citigroup Inc)

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UUID: 7947283

HALISTER1: U.S. Debt Ceiling May Hinder Ultra-Long Chatter, Jefferies Says

U.S. Debt Ceiling May Hinder Ultra-Long Chatter, Jefferies Says

(Bloomberg) -- Since the debt ceiling is likely to limit Treasury’s borrowing for the remainder of FY17, coupon sizes may be unchanged throughout the quarter and there will be no word on any new ultra-long product, Jefferies economists Ward McCarthy and Thomas Simons say in note.
  • When the debt ceiling is a “binding constraint” on issuance, Treasury tends to rely on bills for financing in order to have flexibility in maintaining “reasonable cash balances”
  • Treasury won’t announce a new issue when it’s “tight up against the debt ceiling”
    • Expect no comments about new maturities in the refunding statement and comments during the press conference “will be non-committal”
  • Similar to last quarter, Treasury projections “reflect anticipated distortions from the debt ceiling”
    • Treasury would normally be making paydowns in 2Q, but the debt ceiling prevented it from borrowing as much as it would’ve in 1Q “and as a consequence some of the borrowing spilled into 2Q”

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Thomas Simons (Jefferies LLC)
Ward McCarthy (Jefferies LLC)

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UUID: 7947283

HALISTER1: FREMF 2017-K64 Mortgage Trust, Freddie Mac Structured Pass-Through Certificates, Series K-064 - DBRS Presale Report

FREMF 2017-K64 Mortgage Trust, Freddie Mac Structured Pass-Through Certificates, Series K-064 - DBRS Presale Report

Alert: HALISTER1
Source: DBR (Dominion Bond Rating Service)

People
Erin Stafford (Dbrs, Inc.)
Kevin Mammoser (DBRS Inc)

Topics
Credit Analysis Research
Credit Research
Fixed Income Research
Investment Research
Reports

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UUID: 7947283

HALISTER1: RESEARCH ROUNDUP: UST Outlook Hinges on Tax Reform, Fed Holdings

RESEARCH ROUNDUP: UST Outlook Hinges on Tax Reform, Fed Holdings

(Bloomberg) -- Positioning views on USTs are focused on the potential impact on yield curve of tax reform and wider deficits and of Fed reinvestment tapering.
  • Citi (Jabaz Mathai and Jason Williams)
    • “Fiscal fatigue is likely to continue weighing on the curve”
    • Fed appears likely to raise rates in June, yet “we would not want to assign more than a 65%-70% probability to that outcome at this point”
    • Investors are increasingly skeptical Congress will pass any tax reform; if it doesn’t, March 13 highs for 10Y yield “may very well represent the peak” for 2017, and curve should flatten as deficits become less of a concern
    • Fair value for 10Y yield based on global framework is 2.65%, suggesting “rates can move higher in the next couple of months if Washington gets its act together”
    • In Treasury futures, new longs in FV and TY probably “played a bigger part in the rally during April than short covering”; shorts have not capitulated materially, thus “cleaner short positioning” is needed “before a strong short conviction trade can be entered”
  • BofA (Shyam Rajan and Carol Zhang)
    • Impact of deficit expansionary stimulus on shape of UST curve will be a key trade if temporary tax cuts gain traction
    • BofA’s long-term curve model suggests forward deficit projections matter more than spot deficits, and that a 50bp increase in 2Y rates “offsets the steepening impact of 1% deterioration in forward deficits/GDP”
    • Model offers these rules of thumb:
      • $200b increase in 5yr forward deficit projections steepens 5s30s by 15bp
      • 25bp increase in 2Y yields flattens 5s30s by 7.5bp
      • Thus, “structural bear steepeners only make sense if coupled with out-of-the-money payers on the front end”
  • SocGen (strategists led by Subadra Rajappa)
    • UST 10Y yield may rise 40bp-60bp over three years as Fed pares SOMA reinvestment; MORE
  • BMO (Margaret Kerins and Dan Belton)
    • UST 10Y yield has scope to 3.5% by end-2019 as Fed ends balance sheet reinvestment and raises rates; MORE
  • Nomura (strategists led by George Goncalves)
    • UST 10Y yields are 20bp-30bp too low based on outlook for Fed rate hikes and balance-sheet unwind, yet are likely to be contained in short term by headline risks
    • 10Y yields may carve out bottom between 2.1%-2.4% in next two weeks
    • 10Y and 30Y supply needs to clear at higher coupons to confirm resumption of selloff
    • Favor curve steepeners based on Fed balance sheet action, but respect short-term flattening bias tied to Fed rate hikes and reach for duration
    • Opportunities are increasing in cross-rates; in particular, U.S.-German 10Y spread has room to narrow based on cyclical recovery and possibility of “a more straightforward taper” by ECB in coming months
  • TD (Priya Misra and Gennadiy Goldberg)
    • 5y swap spread tightener recommended based on expectation that deficits will widen over 10-year period; MORE
  • Barclays (strategists led by Rajiv Setia)
    • Maintain 3s10s flatteners given benign hiking cycle priced in; also maintain U.S.-U.K. 10Y convergence trade
    • Expect Fed to reiterate strengthening labor market conditions but not strongly signal hike in June
    • In RV, maintain short OTR 30s vs double old 30s, given current pricing of liquidity premium should be lower
    • In vol, recommend 3m*5y 1x2 receiver spreads to take advantage of low realized vol, rich receivers and low probability of large rally ahead

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Jabaz Mathai (Citigroup Inc)
Jason Williams (Citigroup Inc)
Carol Zhang (Bank of America Corp)
Daniel Belton (Bank of Montreal)
Gennadiy Goldberg (TD Securities USA LLC)

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UUID: 7947283

HALISTER1: PREVIEW U.S. APRIL AUTO SALES: Will Rebound Help Calm Concerns?

PREVIEW U.S. APRIL AUTO SALES: Will Rebound Help Calm Concerns?

(Bloomberg) -- U.S. April light vehicle seasonally adjusted annual rate (SAAR) estimate 17.1m vs 17.4m y/y. Analysts say the key question is if a rebound in auto sales from disappointing March levels will be enough to alleviate broader industry concerns of weaker used car pricing, rising inventories and higher incentives.
  • Most automakers report monthly sales Tuesday pre-market
  • See Bloomberg estimate chart
  • GM supply chain; Ford supply chain; FCAU supply chain
  • Bloomberg Intelligence primers for GM, Ford, Fiat Chrysler
    • BI credit primers for GM, Ford, Fiat Chrysler
  • 1Q results GM, Ford, Fiat Chrysler
ANALYST COMMENTARY:
  • JPMorgan (Ryan Brinkman): U.S. light vehicle SAAR likely to rebound to over 17m in April, represent a significant reacceleration vs March and providing some reassurance to investors; incentives remain higher y/y through first 20 days of April, although pace of y/y increase appears to be moderating
  • RBC (Joseph Spak): Question is if recovery in SAAR will be enough to stem and/or reverse the negative sentiment; says would be “surprised if an improved April SAAR print is enough to calm down industry concerns”
  • Barclays (Brian Johnson): An April SAAR rebound to 17m+ is important, as investors seeking some comfort that March SAAR of 16.6m did not mark the next significant step down in the cycle; says debate is not whether or not cycle will get worse, but if the cycle will be more of a gradual erosion, or if cycle is in imminent danger
  • Buckingham (Glenn Chin): Sees GM “slightly” outperforming industry sales, due to elevated incentive spending and Ford to underperform, losing ~40 basis points of market share y/y; sees both GM and Ford shares could come under pressure as it would be 4th month of stagnant auto sales and could deepen concern about industry pricing
  • Edmunds (Jessica Caldwell): Sees April SAAR of 17m, representing a 4% decrease y/y; “These year-over-year declines may become more typical as the year progresses, but there’s no reason to be in panic mode. Historically, car sales are still strong”
ESTIMATES:
  • Big 3 ests.:
    • GM: -2%
    • Ford: -4.7%
    • Fiat Chrysler: -5.9%
  • Other ests.:
    • Toyota: -4.2%
    • Honda: -5.3%
    • Nissan: +1.5%
    • Hyundai/Kia: -5%
    • Volkswagen/Audi: -0.4%
  • NOTE: April 2017 had 26 selling days vs 27 y/y
RELATED:
  • Earlier, Incentive Surge Comforts April Auto Sales After March Scare: BI
  • Earlier, A $50,000 Chrysler Minivan Explains Slowing U.S. Auto Sales
  • April 28, GM Truck and SUV Build Boosts Profit as Plant Shutdowns Loom

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
005380 KS (Hyundai Motor Co)
F US (Ford Motor Co)
FCAU US (Fiat Chrysler Automobiles NV)
GM US (General Motors Co)
7267 JP (Honda Motor Co Ltd)

People
Brian Johnson (Barclays PLC)
Glenn Chin (Buckingham Research Group)
Jessica Caldwell (Edmunds.com)
Joseph Spak (RBC Capital Markets)
Ryan Brinkman (JPMorgan Chase & Co)

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UUID: 7947283