Halister News

(Bloomberg) -- Credit markets are likely to be quiet during the European morning session ahead of the U.S. jobs report, which is the latest data point that will drive the debate over the Fed rate outlook. The data may struggle to move corporate bond valuations unless it comes out well below or above consensus, Bloomberg strategist Simon Ballard writes.

• August NFP due 2:30pm CET; est. gain 180k vs 255k prior
  • A number just below, but close to forecasts should be a sweet spot for risk assets, underscore low for longer terminal Fed funds rate and bolster investors’ hunt for yield
  • A weak number -- below 100k -- may trigger corporate spread weakness across the quality curve on implied deterioration of macro fundamentals
  • A strong number -- above 200k -- would renew September Fed tightening speculation; any backup in UST yields could damp the hunt for yield and trigger a steeper quality curve as investors pare HY bid
• Risk Appetite Model pricing in “low for longer” as the way forward for credit markets in September

• CDX IG closed +0.9bps at 77.24 in overnight session; iTraxx Asia Ex Japan IG currently +0.03bps at 113.02 and iTraxx Australia quoted -0.8bps at 99.06

NEWS

• Corporate News
• Toyota China Aug. Vehicle Sales Rise 1.8% Y/y
• Lululemon Falls 7%; 3Q Adj. EPS May Miss, 2Q Comps W/ DTC Trails
• Ingenico May Move After VeriFone Cuts EPS, Rev. Forecasts
• Tata Motors Rises After August Sales Climb 6% Y/Y

• Financial News
• Banks Win Converts in Campaign to Blunt Basel Capital Overhaul
• Lloyds Best Bank to Short Among U.K. Lenders, Bernstein Says
• Bank of Russia Revokes License of Bank Tetrapolis

• Credit Rating News
• Posco E&C Downgraded to Ba1 from Baa3; Outlook Kept Stable
• S&PGR Revises Sunac China Outlook To Negative; Afrms ’B+’ Rtg
• S&PGR Lowers To ’B-’, Puts On Watch Neg Neenah Enterprises Rtg
• Government of Maldives Assigned B2 Rating by Moody’s

• Other News
• BOJ Company Debt Binge Seen After 34% of Sovereigns Hoarded

ANALYST VIEWS

• U.S. equity investors are “wedged” between price- insensitive buyers of yield desperate to match liabilities on the one hand and the absence of visible earnings growth on the other: Jefferies
  • Investors should be aware the “reach for yield” is becoming increasingly distorted
• Corporate bond market will continue to grind tighter in spreads, lower in yield; the default rate will stay low, the bubble will expand some more but returns when we reset the counter for 2017 will not come in at anywhere near these levels as the juice runs dry: creditmarketdaily.com

NEW ISSUES

• Arrow Global (B1 Moody’s) GBP220m 8Y snr sec notes at 5.125%
• Saipem (Ba1/BB+) EU500m 4.5Y bonds at 3%; EU500m 7Y bonds at 3.75%
• Santander UK Group Holdings (Baa1/BBB/A) EU1b 7Y bonds at MS +117
• European IG credit pipeline here and HY credit pipeline here
• Issuers exposed to S-T rollover and interest-rate reset risk here

• NOTE: Simon Ballard is a credit strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.