The Turkish Finance Minister Mr. Albayrak announced a round of tax cuts on Wednesday which would be applicable to cars, white goods, furniture etc. The lira spiked immediately after the announcement, it lost 2.1% during Wednesday as the tax decision raised concerns from investors over the ability of the Turkish government to balance the economy and to take a disciplined fiscal approach. The lira closed at 5.5829 per USD. The sovereign bonds depreciated as well, TURKEY 28 lost 80 bps, TURKEY 47 weakened by more than a point, while most of the corporates appreciated. VAKBN  6 22 and YKBNK 8.5 26 both gained more than a point; EXCRTU 6.125 24, GARAN 6.125 27, ISCTR  6 22 and VAKBN 3.5 19 also strengthened by half a point.

In GCC space, Saudi Arabia’s budget deficit fell sharply in the first half of 2018 on the back of the surge in oil and other revenues. The budget shortfall in the first three quarters of 2018 was $13.1bn, a 60% drop from the same period last year. The KSA curve shifted up yesterday, KSA 47s fell by 25c to 92 lvl. Over in Bahrain, the Bahraini headline real growth rate increased in the second quarter of 2018 to an annual rate of 2.4%, a significant acceleration of growth from the previous quarter, underpinned by both the normalisation of oil production and markedly faster non-oil growth. BHRAIN 47 continued it’s decline yesterday however sliding another 60c to mid-92 levels. Bahraini OILGAS came to the market yesterday with new 2-tranche $1bn deal, issuing OILGAS 24 at 7.625% and OILGAS 28 at 8.375%. The book oversubscription was not large, last heard only 2x, but the bonds performed well this morning, seen up 50c each on bids in the morning.

The Russian Ministry of Finance sold RUB 12 bn of OFZ bonds during its auction yesterday. The 7% three-year bonds were issued at 8.29% yield with the bid-to-cover ratio of 1.85. The ruble lost 0.6% and closed at 65.88 per USD. RUSSIA 47 lost half a point (mid 92 level) while the corporates lost 10-20 bps on average.

The rating agency Fitch downgraded the Mexican outlook yesterday to “negative” from “stable” but kept the rating at BBB+. The decision was made after the president-elect announced a cancellation of new airport project. The investors are concerned over the strength of the rule of law in doing business and whether the new administration will respect long-term contracts. The peso lost 2.1% just after the announcement. MEX 48 slightly weakened (lower 87 level) while the corporate credits dropped more significantly. MXCHF 4 10/04/27, BIMBOA 4 7/8 06/27/44 and BNCE 3.8 08/11/26 underperformed, each lost more than a point, others lost 30-60 bps on average.

The Brazilian Central Bank kept the interest rate unhunched at 6.5% level during Wednesday’s meeting as it was widely expected as the inflation remains under control. BRAZIL 47 lost around 40 bps, the corporates traded mixed: CAIXBR and CSNABZ curves slightly appreciated while GGBRBZ, VALEBZ and BRASKM curves weakened.

In the UK, the Times of London reported that British banks will remain their access to European markets after Brexit as part of the agreement. The pound rallied by 0.7% following a report, while the 10Y Gilt generic yield was up 5bps to 1.475% this morning.

In the EU, the yield on 10Y BTPS lost 5 bps on Wednesday (3.425% level) and is currently trading at 3.378% while the yield on 10Y DBR closed unchanged yesterday at 0.38% level but now is 2 bps up. The Cyprus curve continued its rebound yesterday, as investors found appetite for the paper again as risk-off mood subsided. The new CYPRUS 28 was up another 30c yesterday and is now back up to 100 territory.

In the US, the stock market gained for the second day, S&P added 1.1%, Dow rose by 1%. The private sector payroll statistics issued on Wednesday showed an increase of 227k vs 187k expected. The yield on 10Y USTs gained 3 bps and reached 3.149% while the dollar index remained unchanged.

Asian stock traded mixed this morning NIKKEI -0.85%, HANG SENG +1.84% & CSI +1.87%.

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