Halister News

(Bloomberg) -- Venezuela’s proposed “restructuring” may not amount to a default, merely a plan to refinance some of the shorter-term sovereign bonds, according to Oxford Economics.

• Maduro hasn’t mentioned a debt moratorium
• Delayed coupons may still get paid
• “We think the government is only planning to reprofile short-term sovereign debt while leaving PDVSA’s debt untouched”
• Trying to restructure sovereign bonds without PDVSA’s still risks investors going after PDVSA assets
• Government could still declare moratorium as negotiating strategy
• Venezuela could sell bonds to non-U.S. investors and use proceeds to service debt
• If restructuring fails “the government could return to its original strategy of cutting imports to repay bondholders”

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net To contact the editors responsible for this story: Michael P. Regan at mregan12@bloomberg.net Brendan Walsh

--AARON KIRCHFELD

--ELIZABETH FOURNIER

(Bloomberg) -- Mattel rises as much as 2% after DA Davidson analyst Linda Bolton Weiser upgraded to neutral from underperform, PT $12, saying shares have absorbed most negative fundamental developments.

• DA Davidson is "by no means turning positive" as its 4Q, 2018, and 2019 EPS estimates are still below consensus, the analyst writes in a note 
• However, Weiser views MAT’s two-year cost reduction program and plans to reduce SKUs as steps "in the right direction," and likes the "take charge" tone of new CFO Joe Euteneuer
• Sees no imminent liquidity issue; says an equity offering of ~$500m would be a good idea to reduce debt, but says the new CFO seems averse to issuing equity
• Reiterates that MAT is not likely a takeout candidate
• Shares down 53% YTD while S&P 500 is up 16%
• NOTE: Oct. 30, Mattel Can Be Looked at as Potential Acquisition Target: BMO
  • Oct. 27, Mattel Bond Spreads Blow Out 170bps After S&P Cuts to Junk
  • Oct. 27, Is Mattel’s Turnaround Plan Another ‘Head Fake’?: Street Wrap

To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Steven Fromm

(Bloomberg) -- The greenback will probably come under renewed pressure in the coming months, says Brendan Murphy, managing director of global and multi-sector strategies at Standish Mellon Asset Management Co., which oversees $155 billion.

• “The dollar should be weaker versus the euro, versus EM currencies, and pretty much across the board,” he says
  • Started the year with a tactical short on USD; recently reduced those bets and is looking to add bearish positions
• Expects Fed to raise rates in December, plus 2 to 3 times in 2018
• Sees UST 10Y yield rising to 2.5% to 2.75% range next year
  • “We like TIPS,” Murphy says. “Inflation protection is cheap, we’re avoiding the long end, we like the intermediate-duration part of the curve. We think there’s room for the curve to steepen.”
  • Underweight positions in core-Europe bonds
• “Inflation is my biggest concern,” he says; investors are complacent about volatility even though synchronized global growth, improving labor markets and accommodative monetary policy may spur inflation
  • If central banks need to slam on the breaks, that would be “disruptive” and fan volatility in FX markets
  • Cheap yen call options are good protection against this scenario because the currency would benefit from haven demand; looking at 6-month USD puts, JPY calls and selling on upside of CAD puts, JPY calls
• Attractive EM currencies include Argentine peso, Mexican peso, Turkish lira and Polish zloty, Murphy says

To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net Mark Tannenbaum

(Bloomberg) -- GBP front-end may now require a more tactical approach given BOE may not be comfortable with the rally in reaction to its latest statement. This may bode well for fading any steepening of GBP gamma curve and keep volatility rich relative to EUR, where ECB has successfully extended lower volatility for longer.

• The scale of the GBP rates rally, lead by 5-year real rates (-11bps), raises risk of MPC hawks pushing back against potential dovish reaction over the next few weeks
• GBP 2s10s 6- month implied vol curve at 1.13bp/day (see chart here); GBP-EUR 6m2y implied volatility spread is at 1.3bp/day (see chart here)
• BOE will not want to lose the rates curve where it could further weigh on sterling and add to the real-income squeeze while the main focus for the ECB now is keeping control of the short-end of the curve, keeping short gamma strategies in schatz alive
• BOE expects potential growth at only 1.5%, which implies a lower terminal rate but also a lower bar for the next rate hike
• While the central bank omitted the language from previous statements saying that more hikes could be needed than the market expects, the inflation forecast profile still remains hawkish
• BOE still projects persistent overshoot of CPI inflation above MPC’s tolerance, expecting 2.21% 2-years and 2.15% at 3- years, only marginally reducing forecasts compared to August and implicitly suggesting more tightening is needed than currently priced
• GBP 3-year forward 1-year Sonia rate -- a proxy for the BOE’s terminal rate -- is hovering around 1%, which remains too low relative to the inflation projections, leaving either inflation projections too high or terminal rates too low
• NOTE Tanvir Sandhu is an interest-rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Tanvir Sandhu in London at tsandhu17@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma