Halister News

(Bloomberg) -- U.K. to sell 1.5% 07/2026 for GBP2.25b at 11:30am CET, equivalent to ~20k gilt futures, GBP2.2m/bp in risk.

• Analysts say that, while 10-year gilts as expensive, and near-term risks from the BOE may curb outright demand, the bonds are attractive in RV terms

• NatWest Markets (Oriane Parmentier)
  • Fundamentally, don’t see value in owning current yields given they are rich to fair value, the BOE are likely to stop QE, and there are hawkish risks around this week’s inflation report
  • Cheapening in RV should mean the auction goes fine; 10- year has cheapened ~10bps on the 2022/2026/2030 fly

• RBC (Vatsala Datta)
  • Outright yields on the bond have nudged ~4bps higher since its previous tap on Dec. 6, with the 10-year sector having underperformed, both on yield and asset swap curves; 5s10s30s yield and asset swap curves have now breached the levels seen in December
    • However, the auction bond also continues to look cheap on micro RV against its neighbors, which should prove supportive of today’s auction

• Santander (Adam Dent)
  • Bond is unlikely to ever become CTD; gilts have returned to pre-referendum yield levels in the global rates sell- off
    • Brexit challenges will push U.K. rates back down eventually, but don’t want to fight the bearish momentum at present
  • 2026s have cheapened vs 2027s, though remain rich to fitted curves; RV appeal is limited
  • Neutral on 10-year swap spreads outright, though seen them too tight vs the front-end (19s and 20s); continue to like 4s10s flatteners in ASW

(Bloomberg) -- Nordea raises European equities to overweight, lowers Japanese equities to underweight in latest Global Asset Allocation Strategy for February.

• Has neutral stance on other regions
• Says the economic outlook in Europe “remains solid and the potential for better profits is definitely there”
  • Raises Europe to overweight “given an attractive valuation and exaggerated political risks”
  • Says “the financing will be taken from Japan”
• Overall, Nordea remains overweight equities, underweight long rates
  • Within rates, recommends overweight emerging-market bonds
• NOTE Jan. 30: How Smart Money Can Survive the Trump Era, as Seen From Sweden
• NOTE Jan. 3: Nordea Remains Overweight Equity in Asset Allocation Strategy

To contact the reporters on this story: Anna Molin in Stockholm at amolin3@bloomberg.net; Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net; Tasneem Hanfi Brögger at tbrogger@bloomberg.net