Halister News

(Bloomberg) -- Risk aversion likely to remain key characteristic of global credit mkts, even as spreads appear to be finding a degree of stability this morning. In wake of U.K. rating downgrades, liquidity to remain poor as lack of clarity about timing and full impact of Brexit on U.K., EU and global economies fuels elevated investor uncertainty, Bloomberg strategist Simon Ballard writes.

• Sentiment finding a footing this morning; iTraxx senior/sub financials edging tighter (-4bps/-3bps respectively)
  • But financials susceptible to prospect of possible BoE rate cut; would add renewed pressure to banks’ net interest margins
  • Investors may retain defensive approach to risk overall; many sidelined awaiting signs of further mkt stability/recovery
• UK cut by S&P to AA, loss of last AAA rating; further downgrades possible in coming months
  • Amid political chaos and economic concerns in U.K., any near-term strength in credit mkts may be seen by cautious investors as opportunity to reduce risk; little evidence thus far of any meaningful buying interest at wider spread lvls
• Risk appetite model shows modest rise in vol and spread dispersion to start the week

• CDX IG closed +4.2bps at 91.18 in overnight session; iTraxx Asia Ex Japan IG currently -1.5bps at 149.00

NEWS

• Corporate News
• Monsanto Earnings to Weigh on Prospect of Higher Bayer Offer
• Rolls-Royce: Total Trading in First 5 Months ‘Broadly’ in Line
• Carpetright FY Rev. Misses Est.; 8-Wk UK LFL Sales Down 1.0%
• DCM Climbs Most in Six Months Ahead of 1Q Earnings Report

• Financial News
• Old Mutual Cuts London Jobs as Insurer Continues With Break Up
• Carney’s Warnings Ring True as Brexit Slams U.K. Banking Stocks
• Europe Needs Fund to Avoid Bank Crisis: Italy Official in MF
• China Postal Savings Bank’s H.K. IPO Plan Approved By CBRC

• Credit Rating News
• S&PGR Affirms ’BB/B’ Ratings On Banco Bradesco, Otlk Stbl
• S&PGR Affirms ’BBB+’ Rtgs On Comision Federal De Electricidad
• U.K. Rating Cut Two Levels by S&P, One by Fitch After Brexit

• Other News
• Japan Yields All Drop Below 0.1% First Time in Global Bond Surge
• Treasuries on Brink of History as Guggenheim Says Rally Not Over

NEW ISSUES

• Tuesday was 5th Consecutive Zero Issuance Day; 6th in June; 11th YTD
• 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.