Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>Financial markets are dominated by uncertainties being created by Russia's invasion of Ukraine and the potential economic impact of the Fed raising rates and unwinding its balance sheet simultaneously.</li>
<li>The volatility and level of rates in EM are rising with the US but with differentiation: Asia and Central Europe are underperforming, while Latin America is outperforming.</li>
<li>The possibility of binary economic scenarios playing out as a result of the current uncertainties makes me pause for more clarity before making new trade recommendations.</li>
</ul>


Financial markets are dominated by uncertainties being created by Russia's invasion of Ukraine and the potential economic impact of the Fed raising rates and unwinding its balance sheet simultaneously.
The volatility and level of rates in EM are rising with the US but with differentiation: Asia and Central Europe are underperforming, while Latin America is outperforming.
The possibility of binary economic scenarios playing out as a result of the current uncertainties makes me pause for more clarity before making new trade recommendations.


Rates in Asia Underperform Following the Fed Hike and Russia’s Invasion

<ul>
<li>Foreign investments in China’s government bonds had been on the rise in recent years with the market appearing to acquire a safe-haven status as it became more accessible and liquid.</li>
<li>Russia's invasion of Ukraine may have changed this as the country is likely to default despite its large international reserves, which presents spillover risks to others, particularly China.</li>
<li>After suffering heavy losses in Russian holdings, investors are likely to factor in political and geopolitical risks more explicitly going forward, which would work against China.</li>
</ul>


Foreign investments in China’s government bonds had been on the rise in recent years with the market appearing to acquire a safe-haven status as it became more accessible and liquid.
Russia's invasion of Ukraine may have changed this as the country is likely to default despite its large international reserves, which presents spillover risks to others, particularly China.
After suffering heavy losses in Russian holdings, investors are likely to factor in political and geopolitical risks more explicitly going forward, which would work against China.


Early Signs of a Geopolitical Risk Premium in China’s Bonds?

<ul>
<li>Rates in Asia have sold off as rates globally have risen due to increasing inflationary pressures. However, rates in Asia have risen by less in comparison with the US.</li>
<li>The main reason behind the better performance of rates in Asia is the outperformance of Indonesia and China with both countries benefiting from high real rates.</li>
<li>Looking ahead, a continued rise in rates in the US makes Indonesian local bonds vulnerable to a correction, but rates in China may continue to outperform in my view.</li>
</ul>


Rates in Asia have sold off as rates globally have risen due to increasing inflationary pressures. However, rates in Asia have risen by less in comparison with the US.
The main reason behind the better performance of rates in Asia is the outperformance of Indonesia and China with both countries benefiting from high real rates.
Looking ahead, a continued rise in rates in the US makes Indonesian local bonds vulnerable to a correction, but rates in China may continue to outperform in my view.


How Are Rates in Asia Reacting to the Rise in US Yields?

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>Beijing releases carbon emissions action plan</li>
<li>Lipstick bro pockets $2bn in Singles’ Day sales</li>
<li>Taxing times</li>
<li>US to China: You’ve got our attention now</li>
<li>Beijing warns US on Taiwan support</li>
</ul><p></p><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
Beijing releases carbon emissions action plan
Lipstick bro pockets $2bn in Singles’ Day sales
Taxing times
US to China: You’ve got our attention now
Beijing warns US on Taiwan support
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>Daily economic surprise indexes warn of sharp Chinese economic slowdown</li>
<li>This aligns with falling rates across Chinese yield structure</li>
<li>Moves unrelated to accommodative PBoC monetary policy</li>
<li>Chinese yields could fall another 50-100bp which is bullish for US Treasuries</li>
</ul>


Daily economic surprise indexes warn of sharp Chinese economic slowdown
This aligns with falling rates across Chinese yield structure
Moves unrelated to accommodative PBoC monetary policy
Chinese yields could fall another 50-100bp which is bullish for US Treasuries


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China Treasury (CHINA GOVT)

Rates in Asia Underperform Following the Fed Hike and Russia’s Invasion

With financial markets dominated by uncertainties created by Fed tightening and Russia's invasion, rates in Asia and Central Europe are...

Gautam Jain, PhD, CFA

Early Signs of a Geopolitical Risk Premium in China’s Bonds?

China's government bonds were being viewed as a safe-haven asset but Russia's invasion of Ukraine may have changed this with geopolitical risks...

Gautam Jain, PhD, CFA

How Are Rates in Asia Reacting to the Rise in US Yields?

Rates in Asia have sold off but less than global rates mainly due to the outperformance of Indonesia and China, with the former looking more...

Gautam Jain, PhD, CFA

COP26/ E-Commerce/ Tax/ Weapons/ Taiwan

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

China's Economy: Chips Or Cracks?

Daily economic surprise indexes show sharply lower Chinese economic momentum in early June. This should lead to 50-100bp cuts in rates along the...

Michael J. Howell

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