EU FINANCIALS: Nova Ljubljanska Banka €300 WNG PerpNC5 AT1 - FV
Nov-19 08:56
- FV: 6.625%
- This is 0.125 wider than our FV on Monday, using the same methodology, which feels appropriate give market weakness. - https://mni.marketnews.com/4pkCkpb
- Looking at tier 2 space, NovaLJ 6.875% 2034 trades 7/8bps wide of TPIER 7.25% 2034. Applying a somewhat steeper curve for NOVALJ we consider a 5 year tier 2 would trade ~15bps wide.
- AT1 spreads are 2.2x-2.4x of Tier 2 spreads, and so with the TPEIR AT1's at 5.1 years trading at 6.125%, we think 6.5% is a good starting point.
- At 6.5% the float spread on the new bond would be approx. 414bps - which is 45bps less than that of TPEIR - and so leads us to adjust our FV upwards by 0.125%
- IPT: 7%
- Exp Ratings: NR/BB-/NR
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BOJ: May Revise Up FY25 Growth Forecast At Oct Meeting: Reuters
Oct-20 08:44
Reuters sources on the BOJ's growth forecasts:
- " BOJ MAY SLIGHTLY REVISE UP ECONOMIC GROWTH FORECAST FOR FISCAL 2025 AT OCTOBER POLICY MEETING, SOURCES SAY" Reuters
- "BOJ LIKELY TO MAINTAIN VIEW ECONOMY ON COURSE FOR MODERATE RECOVERY, DESPITE HEADWINDS FROM U.S. TARIFFS, SOURCES SAY" Reuters
BUNDS: Cash Basis Trade
Oct-20 08:25
Bund Basis trade, suggest Cash seller:
- RXZ5 7k at 129.83.
GILTS: Steady Open; Trend In 10-year Yields Still To The Upside
Oct-20 08:22
A fairly steady open for Gilts ahead of an important week for UK data. Futures are -4 ticks at 92.42. A short-term bull cycle in futures remains intact though, with initial resistance at Friday’s high of 93.17.
- Yields are up to 1bp higher across the curve. 10-year yields are currently 4.536%, down from this month’s 4.758% high. Despite this month’s fall in yields, the medium-term trend for the 10-year is still to the upside. Initial support is the April 7 low at 4.363%, which shields trendline support drawn from the November 2022 low at 4.232% today.
- See MNI’s Tech Trend Monitor for more, which also includes charts on the 30-year Gilt yield.
- Fiscal policy remains a key focus for the Gilt market ahead of the Nov 26th budget. The main fiscal headlines from the weekend have suggested that VAT may be removed from energy bills.
- September public sector finance data is due on Tuesday. After correcting for a VAT error in last month’s release, PSNB is currently tracking GBP9.4bln below the OBR’s forecast year-to-date.
- This release, alongside Wednesday’s CPI report (important for the near-term BOE outlook) will feed into the OBR’s Round 3 forecast on October 31 ( see here for more).
Figure 1: 10-year Gilt Yields (Source: Bloomberg Finance L.P)
