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Japan Core Inflation Likely remained 0%; Ip may have edged Up



Japan will release key April economic data on 29 April, including core inflation, industrial production (IP), and job data. Core inflation is expected to have dropped to 0.0% y/y in April from 2.2% in March as the base effect due to the April 2014 sales tax hike has started to wane. A 2% inflation target remains a distant goal for the Bank of Japan, and it is believed that the bank needs to ease still further in H2-2015. IP likely rebounded by 1.0% m/m in April after declining for two straight months. Q1 GDP showed better-than-expected investment readings, which may imply a gradual pickup in business activity. "We expect the unemployment rate to have stabilised at 3.5% in April, with the job-to-applicant ratio rising to 1.16 from 1.15 prior", says Standard Chartered.

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Us Second Q1 Gdp Print may be a Painful Reminder of Data Weakness

US data has mostly disappointed so far this year, with relatively broad-based weakness. Against widespread expectations of an acceleration early in the year, private consumption has remained lacklustre, despite the c.USD 800/household annual windfall from lower gasoline prices. Retail sales have undershot the market consensus for five straight months. As a result of widespread data disappointment, including on payrolls, the US surprise indices have continued to slide down. The Bloomberg surprise index is the lowest since the global financial crisis. The second Q1 GDP data release (Friday, 08:30 ET) may be a painful reminder of the poor start to the year. "We forecast a downward revision to -0.9% q/q SAAR (consensus: -0.8%), from 0.2% in the first print and 2.2% in Q4-2015",says Standard Chartered. This revision would be mostly on lower inventories and net trade, while private consumption could be raised slightly (although to a still-meagre 2.0% q/q SAAR). This could fuel debate about 'residual seasonality' in Q1 GDP data, which some San Francisco Fed researchers have recently discussed in their 18 May note, and that the statistics agency said it would tackle when updated data is released in late July.

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Us Non-Farm Payrolls Likely to rise in May

Next week is a big US data week, with non-farm payrolls, the ISM manufacturing survey, April personal consumption expenditure and inflation data. Regional business surveys have remained mixed lately, and the ISM manufacturing survey is expected to have been stable at 51.5, suggesting still-meagre industrial activity growth (services should continue to do most of the heavy lifting near-term). Standard Chartered notes: We forecast April core PCE inflation - the Fed's preferred measure - to have remained at 1.3% y/y. We think the labour market remained resilient despite recent weaker US data, and we forecast a US payroll gain of 240,000, a touch more than the 223,000 gain in April. Our optimism is supported by recent services surveys showing still-healthy employment intentions, and initial jobless claims touching 15-year lows. We see the unemployment rate staying at 5.4%. This should keep the Fed on track to raise rates later this year (our long-held view is that September's meeting is the most likely time).

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Canadian dollar hits 1-1/2 month trough against US dollar



The Canadian dollar surpassed a sharp retreat versus the US dollar Monday, affected by oil prices that slid on speculations OPEC production levels will remain elevated. US crude prices went up 0.05% at $60.33, but Brent crude erased 0.84% to $65.01. The 2nd quarter will be better… We all need to see numerous figures before we are 100% “convinced that core assumption is correct,” said Greg Anderson, Global Head of Foreign Exchange Strategy at BMO Capital Markets. The loonie closed at 79.78 US cents from Friday's 80.41 US cents. On Friday, the Organization of the Petroleum Exporting Countries (OPEC) will hold its semiannual meeting, which is awaited to retain production at high levels.

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Moody's: the French Market Shows That Bank Disintermediation Is a Viable Way Forward for European Sme Clos



In the context of increasing bank disintermediation in Europe, GIAC Gestion SAS' recent cash flow CLO transaction is an example of a viable way forward for European SME CLOs, says Moody's Investors Service in a new report published today. "FCT GIAC Obligations Long Terme II (GIAC OLT II) illustrates how securitisation can finance SMEs and mid-caps without the direct involvement of an originating bank and its unique features ensure the alignment of interests between the manager, investors and obligors," observes Monica Curti, a Moody's Vice President -- Senior Analyst and author of the report. The securitisation has unique features compared with standardised European collateralised loan obligations (CLOs) and granular SME securitisations. It uses its low cost of funding to provide cheaper financing to SMEs and mid-caps while providing strong protection against adverse portfolio selection. Compared to European BSL CLOs 2.0. the structure has additional challenges, relating to the assets securitised and structural features such as the long two-year ramp-up period. "GIAC Gestion's transactions have performed in line with expectations, despite the recession in France" Ms Curti notes. Defaults indeed remained limited during the credit crunch and often resulted from the fact that French banks decided to cut financing to companies (i.e., on banking loans originated outside of GIAC's transactions). This shows that SME financing remains linked to the banking system, albeit indirectly. The new report: "The French Market Shows That Bank Disintermediation Is a Viable Way Forward for European SME CLOs," is available on www.moodys.com. GIAC OLT II is a securitisation of bonds from French small and medium-sized enterprises (SMEs) and from companies with higher market capitalisation (mid-caps).

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US dollar slides as ECB retains policy, Bund yields extend gain



The US dollar touched its weakest level versus the euro in more than two weeks Wednesday, following the European Central Bank retained its monetary policy amidst recent market volatility and as Bund yields prolonged its advance. ECB President Mario Draghi said the central bank kept interest rates and saw no reason to modify the policy stance. Draghi's remarks confirms the eurozone “was moving in the right direction,” said Eric Viloria, Currency Strategist at Wells Fargo Securities. Also, the benchmark 10-year Bund yields reached 0.89%, the highest since October 2014. The dollar closed at $1.12695 per euro following it hit $1.2855. Against the Japanese yen and Swiss franc, the greenback was at ¥124.300 and 0.93480 franc, respectively.

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Moody's Assigns Caa2 Debt Ratings to the Province of Buenos Aires's 9.95% due 2021 Senior unsecured Notes in Usd



Moody's Investors Service has assigned a Caa2 (Global Scale Foreign Currency) ratings to the Senior Unsecured Notes to be issued by the Province of Buenos Aires for up to USD1,033 million approximately. The ratings are in line with the province's long term foreign currency issuer ratings, which carry a negative outlook. RATINGS RATIONALE On June 2, 2015 the Province of Buenos Aires priced some USD500 million of these new Notes at a 9.95% coupon rate.The bond issuance has been authorized by the Provincial Law Nº14652, by Governor's Decree Nº59 of 2015 and by Resolution Nº106 of the provincial Ministry of Economy. The Province of Buenos Aires will use the proceeds to prepay outstanding provincial debt as well as to fund infrastructure and/or social projects during 2015. At the same time, the Province launched a bond exchange offer for up to USD500 million under a USD1,050 million 11.75% coupon rate Notes maturing in October 2015. After the settlement of the first tranche of these new Notes for USD500 million and conclusion of the mentioned exchange, both tranches will be consolidated and will form a single bond series of up to USD1,033 million. The rated bonds, which constitute direct, general, unconditional and unsubordinated obligations of the province, will be denominated and payable in US dollars with a maturity of six years. The bonds will amortize in two annual installments equivalent to 50% of the outstanding principal in 2020 and in 2021 and pay 9.95% annual interest rate on a semi-annual basis. The bonds will be subject to the State of New York Law. The assigned ratings are based on preliminary documentation received by Moody's as of the rating assignment date. Moody's does not expect changes to the documentation reviewed over this period nor anticipates changes in the main conditions that the bonds will carry. Should issuance conditions and/or final documentation of these bonds deviate from the original ones submitted and reviewed by the rating agency, Moody's will assess the impact that these differences may have on the ratings and act accordingly. WHAT COULD CHANGE THE RATING UP/DOWN Given the negative outlook on the issuer ratings, Moody's does not expect upward pressures in the Province of Buenos Aires's ratings in the near to medium term. However, a change in Argentina's sovereign outlook back to stable could lead to a change in the outlook back to stable of the Province of Buenos Aires. Conversely, a sharp deterioration of the Province of Buenos Aires's financial results, coupled with materially higher debt levels could add downward pressure to the assigned ratings. The province of Buenos Aires could also be downgraded if the negative outlook on the sovereign rating materializes into a rating downgrade. The principal methodology used in this rating was Regional and Local Governments published in January 2013. Please see the Credit Policy page on www.moodys.com.ar for a copy of this methodology.

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Treasuries Pull Back Sharply In Response To Upbeat Jobs Data



Treasuries moved notably lower during trading on Friday, more than offsetting the rebound seen in the previous session. After falling sharply in early trading, bond prices regained some ground but remained firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 9.5 basis points to 2.402 percent. The increase extended a recent upward move by the ten-year yield, which reached its highest closing level in eight months. Treasuries came under pressure in response to the Labor Department's upbeat monthly jobs report, which added to concerns about the outlook for interest rates. The report said non-farm payroll employment jumped by 280,000 jobs in May compared to economist estimates for an increase of about 225,000 jobs. While the increase in employment in April was downwardly revised to 221,000 jobs from 223,000 jobs, the employment growth in March was upwardly revised to 119,000 jobs from 85,000 jobs. With these revisions, the Labor Department said employment gains in March and April combined were 32,000 more than previously reported. The report also said the unemployment rate inched up to 5.5 percent in May from a nearly seven-year low of 5.4 percent in April, but the uptick primarily reflected an increase in the size of the labor force. Rob Carnell, chief international economist at ING, said, "Just when all the Fed speakers were sounding more and more cautious, in comes a strong labor market report and puts thoughts of tighter policy back on the agenda." Carnell said the Federal Reserve is still unlikely to raise interest rates at its next meeting later this month, although he said a third quarter rate hike looks like a decent bet. The economic calendar for next week starts off relatively quiet, although key reports on retail sales and producer prices are likely to be in focus later in the week. Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds. The Treasury is due to auction $24 billion worth of three-year notes next Tuesday, $21 billion worth of ten-year notes next Thursday and $13 billion worth of thirty-year bonds next Thursday.

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US dollar strengthens on stronger than expected jobs data



The US dollar accelerated on Monday as firm US jobs data amplified bets the Federal Reserve will raise interest rates in September. According to the Labor Department, nonfarm payrolls leaped 280,000 in April, while unemployment rate rose to 5.5% in May. The greenback closed at $1.1108 per euro from last week's $1.1380. Against the Japanese yen, the dollar stood at ¥125.66. Payrolls data mark the case for a sturdy dollar. The markets could speculate “Fed might raise rates even twice this year,” said Masatoshi Omata, Senior Manager of Market Trading at Resona Bank. On Friday, New York Fed President William Dudley said he still anticipates the US central bank to increase rates later this year although he is concerned regarding the progress in the labor market.

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