HYBRIDS: Hybrids: Week in Review
Feb-21 15:49
- SES Outlook was cut at Moody’s. Perps lost 1.5 to 1.75 pts on the week but did see a late rebound on Friday with moves of +1.5->1.6pts on the longer calls. The FCC had said that they would vote this month on whether to proceed with the C-Band auction so that means that we should receive news next week.
- EDPPL: S&P confirmed that 5 out of 6 hybrids will lose Equity Credit due to changes in Methodology around “sliding step-ups”. The high price EDPPL 5.943 has underperformed this month on the risk of a 101 Call. Given that the company will have to address its whole stack, we would expect a holistic approach from the borrower.
- We wrote on Bayer this week with regards to its legal lobbying in Iowa and Missouri. We don’t expect any imminent developments here but key for the company this year will be to have FIFRA legislation apply to its legal cases. This could potentially free up a large portion of the €5.7bn reserves. BAYNGR perps were unchanged to +1/8 on the week.
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GILTS: Yields Now Higher On The Day
Jan-22 15:46
Gilts have generally tracked swings in wider core global FI markets today.
- The open saw the recent recovery rally extend a little further, although early session highs have not been retested, with the opening move now more than fully reversed.
- Futures last -21 at 92.02, after registering a fresh session low at 91.99 in recent trade.
- Technical parameters flagged earlier remain untouched.
- The overarching technical setup remains bearish, but the recent recovery poses a risk to that trend.
- Fibonacci resistance located at 92.75.
- Bears need to force a move through the Jan 16 low (90.68) to assert fresh pressure.
- Yields 1.0-2.5bp higher across the curve.
- 10-Year spread to Bunds ~2bp wider around 210bp after Tuesday saw the first close below that level since November.
- Higher-than-expected PSNB may have contributed to today’s widening.
- Looking ahead, tomorrow will bring GBP4.25bln of 4.375% Mar-28 supply.
- Friday will then bring the release of the flash PMI data. Markets could prove to be increasingly sensitive to that data given downside risks to UK economic growth.
OIL: Trump Comments on Venezuelan Oil Sees as Negotiating Tactic: Platts
Jan-22 15:41
President Donald Trump's suggestion that the US will "probably" stop buying oil from Venezuela is seen as a negotiating tactic rather than policy, Platts said.
- David Goldwyn, president of Goldwyn Global Strategies and chair of the Atlantic Council Global Energy Center's Energy Advisory Group, believes Trump is increasing pressure on Venezuela ahead of negotiations.
- Goldwyn argued that Trump's "America First" policy aims to reduce migration pressure, avoid reintroducing certain countries to Venezuelan oil control, moderate US energy prices, and prevent a humanitarian crisis.
- Trump advisors told Axios earlier in the week that the administration wants regime change in Venezuela but that “doesn't necessarily mean military action.”
- Experts are divided on whether Trump will revoke US licenses for oil companies operating in Venezuela.
- Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, suggested licenses might be reversed but it won’t necessarily lead to the return of "maximum pressure".
- However, replacing Venezuelan crude would be complex as local US grades are misaligned with refinery needs.
MNI EXCLUSIVE: MNI Talks To EU Officials
Jan-22 15:40
EU officials are scrambling for ways to face up to the economic challenge of the U.S. under Trump.-On MNI Policy MainWire now, for more details please contact sales@marketnews.com
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