Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.</li>
<li>Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.</li>
<li>I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.</li>
</ul>


In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.
Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.
I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.


Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022

<ul>
<li>With the volatility of US rates remaining elevated, it is a good time to evaluate how my thematic recommendation for 2022 of curve steepening trades in EM is playing out.</li>
<li>The slopes of rate curves in EM have stabilized even as they continue to flatten in the US and, more broadly, DM – a break in correlation that should persist.</li>
<li>EM curves should start steepening as ex-Asia they are ahead of DM in rate-hiking cycles and their worsening debt dynamics should keep the risk premium elevated in the long end.</li>
</ul>


With the volatility of US rates remaining elevated, it is a good time to evaluate how my thematic recommendation for 2022 of curve steepening trades in EM is playing out.
The slopes of rate curves in EM have stabilized even as they continue to flatten in the US and, more broadly, DM – a break in correlation that should persist.
EM curves should start steepening as ex-Asia they are ahead of DM in rate-hiking cycles and their worsening debt dynamics should keep the risk premium elevated in the long end.


An Update on High Conviction 2022 Thematic Rate Curve Steepening Trades in EM

In this edition of Alpha Bites, I list my current open trade recommendations in EM FX and rates along with links to notes where I discuss the trades in more detail. The tables include expected returns on the trades on a 3-month horizon assuming mean reversion in this period.

In this edition of Alpha Bites, I list my current open trade recommendations in EM FX and rates along with links to notes where I discuss the trades in more detail. The tables include expected returns on the trades on a 3-month horizon assuming mean reversion in this period.

Alpha Bites: Current Trade Recommendations in EM FX and Rates

Russia's monetary policy decision tomorrow is a close call with consensus expectations of a 50 bp hike. I expect a smaller 25 bp rate hike but with hawkish messaging. Although inflation increased sharply in September, it was driven primarily by food prices. In the face of rising economic uncertainty due to new restrictions with daily coronavirus cases reaching the highest level, CBR should be cautious in tightening monetary policy. Moreover, the previous rate hikes and the recent currency strengthening should have a disinflationary impact with a lag. If the CBR moves as I expect, it should be supportive of my 2s5s steepener recommendation.Separately, the attached file is a snapshot of the EM 10y rates market in which I seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Russia's monetary policy decision tomorrow is a close call with consensus expectations of a 50 bp hike. I expect a smaller 25 bp rate hike but with hawkish messaging. Although inflation increased sharply in September, it was driven primarily by food prices. In the face of rising economic uncertainty due to new restrictions with daily coronavirus cases reaching the highest level, CBR should be cautious in tightening monetary policy. Moreover, the previous rate hikes and the recent currency strengthening should have a disinflationary impact with a lag. If the CBR moves as I expect, it should be supportive of my 2s5s steepener recommendation.Separately, the attached file is a snapshot of the EM 10y rates market in which I seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Russia to Deliver a Small Rate Hike Supporting the Steepener Recommendation

Among the themes in EM rates that we have highlighted in recent weeks are: EM rates have underperformed the US and, within EM, rates in Latin America have underperformed Asia. In this note, we look at the performances of rates in different countries adjusted by their respective betas that corroborate the earlier findings and help identify the outliers more clearly.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Among the themes in EM rates that we have highlighted in recent weeks are: EM rates have underperformed the US and, within EM, rates in Latin America have underperformed Asia. In this note, we look at the performances of rates in different countries adjusted by their respective betas that corroborate the earlier findings and help identify the outliers more clearly.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Which Countries Are Outliers Within EM Rates This Year?

Russia

A vanilla interest rate swap us an agreement between two counterparties to exchange cashflows (fixed vs floating) in the same currency. This agreement is often used by counterparties to change their fixed cashflows to floating or vice versa. The payments are made during the life of the swap in the frequency that is pre-established by the counterparties.

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Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022

I provide a performance update of all my trade recommendations along with discussing the open trades. I have closed 25 of the 35 trades recommended...

Gautam Jain, PhD, CFA

An Update on High Conviction 2022 Thematic Rate Curve Steepening Trades in EM

Revisiting my thematic recommendation for 2022, EM rate curves should start steepening as ex-Asia they are ahead of DM in rate-hiking cycles and...

Gautam Jain, PhD, CFA

Alpha Bites: Current Trade Recommendations in EM FX and Rates

In this edition of Alpha Bites, I list my current open trade recommendations in EM FX and rates along with links to notes where I discuss the...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Russia to Deliver a Small Rate Hike Supporting the Steepener Recommendation

Despite high inflation, Russia should raise the policy rate by less than consensus due to new restrictions as Covid cases have risen sharply. This...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Which Countries Are Outliers Within EM Rates This Year?

Looking at the beta-adjusted performances of rates in EM countries corroborates our earlier findings that EM has lagged the US and LatAm rates have...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)