Markets Mark Time


  • The economic data stream is picking up, but there is an uneasy calm in the markets
  • Sterling has been weakened by two developments, one political and one economic
  • Markit reported softer eurozone flash February PMI
  • The focus in North America will be on the performance of US equities
  • Korea reported trade data for the first 20 days of February; South Africa January CPI rose 4.4% y/y, as expected

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From the Securities Lending Trading Desk

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Last week, shares tumbled in one of Australia’s top electronics retailers after reporting poor profit guidance for 2018.  Dutch Auctions were in focus in the US last week as both Amgen Inc (AMGN) and Greenhill & Co., Inc (GHL) recently announced plans to repurchase shares.  Fallout from Carillion has spread across UK companies and given rise to increased securities lending demand.

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Dollar Trades Higher, Stocks Challenged at Key Chart Point

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  • The dollar is finding better traction today, building on the upside reversal seen before the weekend
  • The budget deficit occupies center stage in the US today as debt issuance picks up
  • Sweden reported a 0.8% m/m decline in January CPI
  • The RBI is reportedly reviewing its process for allowing local companies to issue debt overseas; Poland reported strong January real sector data

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EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended on a mixed note Friday, but capped off a very strong week overall.  Best performers over the past week were RUB, ZAR, and COP, while the worst were PHP, CNY, and TWD.  There is not much happening this week that could disrupt the weak dollar narrative, and so EM FX should continue to rally. Continue reading

New Window of Opportunity for Dollar Correction

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Investors sense that the sands beneath their feet are shifting.  Rising US yields and equities have traditionally been yen negative.  With the recent gains that carried the yen to its best level against the dollar since late 2016 and up 6% to lead the major currencies this year, the old relationships appear to have broken down.

The 60-day rolling correlation between the level of the dollar-yen exchange rate and the yield on the US 10-year Treasury yield has become inverted since mid-January, and now at -0.87 is the most inverted since 2001.  Rising yields also were linked to the recent dramatic slide in equities, but in recent days, the US yield edged higher while the stocks rallied.  The S&P 500 turned in its best weekly performance since 2011.  The US 10-year yield rose nine basis points at the most and finished the week two basis points higher. The two-year yield rose nearly a dozen.  The rise in the short-end appears to be a function of shifting views on Fed policy.  The implied yield of the December 2018 Fed funds futures rose 8.5 bp over the past week.  

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What Has Changed in EM


  • The National Stock Exchange of India will end all licensing agreements and stop offering live prices overseas
  • Philippine central bank cut reserve requirements for commercial banks
  • Egypt cut rates for the first time since 2015
  • Israeli police recommended that Prime Minister Netanyahu be charged
  • South Africa President Zuma resigned before a no confidence vote was held
  • Brazil President Temer will issue a decree for the military to take control of security in the state of Rio de Janeiro.
  • Colombia hopes to start an oil hedging program Continue reading