EM CEEMEA CREDIT: MASDAR: neutral read for upgrade to A1 stable by Moody's
Apr-04 12:36
Masdar Abu Dhabi Future Energy (MASDAR; A1/-/AA-)
"*MOODY'S RATINGS UPGRADES MASDAR'S RATINGS TO A1, STABLE OUTLOOK" - BBG
• Neutral read. The rating upgrade to A1, on stable outlook, for snr unsecured debt and LT issuer ratings comes as no surprise. MASDAR 5.25 Jul34 charts at the local wides at z+168bp (source: Bloomberg data).
• The agency cites an increase in likelihood of government support for the issuer behind its decision. Masdar is aiming to reach 100GW in capacity by 2030, a strategic objective for the country’s Vision 2030.
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EUR: Differing Analyst Views as Euro Rally Develops
Mar-05 12:16
- *Deutsche Bank note the biggest and fastest fiscal policy shift in post-unification German history exceeded even their optimistic expectations. Recall that last week DB turned from bearish to neutral on EURUSD, and the latest developments prompt them to shift to an outright bullish view.
- For now, Deutsche go long EURUSD targeting 1.10, noting that that their rate differential models are already up at 1.09. They will be re-assessing their more medium-term dollar views as the newsflow progresses.
- *HSBC: German fiscal optimism will support EUR-USD in the near-term but it's worth bearing in mind that other factors will also impact EUR-USD. Recent softer US data has pushed US Treasury yields lower, weighing on dollar strength and Friday’s US jobs data will also be key. Additionally, US trade tariffs on the EU loom on the horizon while any EUR peace dividend relies upon a peace deal being successfully agreed.
- *Rabo: On the back of the news that Germany is poised to change its constitution to enable more fiscal spending, Rabo have raised their one-month forecast for EURUSD to 1.07. They will publish fresh EUR forecasts out to 12 months at the end of this week.
- *ING note the problem for the EUR/USD story here is that the fiscal news has not moved the needle on ECB policy expectations. The forward ESTR curve still prices the low point for the ECB easing cycle near 1.75%. No doubt this is a function of the global tariff threat which looks like it will be coming Europe's way next month.
- ING haven't been calling for such a decisive upside break in EUR/USD, and don't yet buy into this talk of the dollar losing its reserve currency status. This looks more of a cyclical decline on soft US data this year. For the near term, however, US activity data will probably be the determinant of whether we trade up to 1.0800. EUR/USD maybe more of a 1.03/04 story when broader US tariffs come in next month, compared to ING’s prior forecasts of 1.00/02 in coming quarters.
- *MUFG: More tariff action is very likely still coming for Europe, which in MUFG’s view will limit EUR/USD upside from these levels. Trump last night in his address to Congress was clear that the EU would be hit with tariffs. With US yields rebounding last night and Trump sounding very aggressive on future tariff action on the EU and others, MUFG are unconvinced that this move higher in EUR will extend much further. Leveraged Funds have been short EUR, but positioning has already been reduced and is not extreme by historical comparison.
US DATA: Mortgage Refis Sensitive To Limited Declines In Mortgage Rates
Mar-05 12:16
- MBA composite mortgage applications jumped 20% last week (sa) to more than reverse a 12% decline over the prior two weeks.
- Refis jumped 37% after a cumulative 11% two-week decline, whilst new purchases increased 9% after a two-week decline of -13.5% (as part of a five-week decline totalling -19%).
- Refis have proven sensitive to declines in lending rates despite the outright level still being high. The 30Y conforming rate fell 15bps to 6.73% for what’s now a 36bp drop since the recent high of 7.09% in January, although is still elevated compared to lows of 6.13% seen in September on then expectations of a more prolonged Fed cutting cycle.
- A reminder of how depressed mortgage activity remains though: new purchases are at 56% of 2019 averages whilst refis are at 45%.
OUTLOOK: Price Signal Summary - Bear Threat In Bunds Remains Present
Mar-05 12:15
- In the FI space, Bund futures have gapped sharply lower today and price action is likely to remain volatile. The contract has pierced a key support at 129.41, the Feb 14 low. A clear break of this level would confirm a resumption of the downtrend and pave the way for a move towards 128.68, a 1.618 projection of the Feb 5 - 19 - 28 price swing. Moving average studies on the continuation chart are in a bear-mode position, highlighting a dominant downtrend. Resistance is at 130.40, the Feb 19 low.
- Gilt futures gapped lower today and this undermines the recent bullish theme. Instead, the move down highlights a developing bear threat. A continuation lower would signal scope for a test of the next key short-term support at 91.79, the Feb 20 low. This level also represents a bear trigger and a break would open 91.27, a 1.236 projection of the Feb 6 - 20 - Mar 4 price swing. Initial resistance is at 92.57, the Mar 3 low.
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