Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this week’s Alpha Bites, I recommend closing rate curve flatteners in Thailand and India. I had recommended flatteners in these two countries as curves in Asian countries in general lagged the flattening in the US and the rest of EM. This was because of rising growth uncertainty resulting from new coronavirus waves amid slow pace of vaccinations. This is now changing as rate curves in both countries have begun to price in monetary tightening, leading to flattening of the curves.

In this week’s Alpha Bites, I recommend closing rate curve flatteners in Thailand and India. I had recommended flatteners in these two countries as curves in Asian countries in general lagged the flattening in the US and the rest of EM. This was because of rising growth uncertainty resulting from new coronavirus waves amid slow pace of vaccinations. This is now changing as rate curves in both countries have begun to price in monetary tightening, leading to flattening of the curves.

Alpha Bites: Take Profits on Flattener Recommendations in Thailand and India

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

The Fed signaled yesterday that it may start tapering its asset purchase program as soon as the next FOMC meeting in November. With the US 10y yield staying within the narrow range where it has traded since early July following the announcement, EM curves continue to normalize with those too steep starting to flatten, and vice versa. We expect the process has further to run and continue to recommend holding flatteners in Colombia, India, and Thailand, and a steepener in Russia.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.

The Fed signaled yesterday that it may start tapering its asset purchase program as soon as the next FOMC meeting in November. With the US 10y yield staying within the narrow range where it has traded since early July following the announcement, EM curves continue to normalize with those too steep starting to flatten, and vice versa. We expect the process has further to run and continue to recommend holding flatteners in Colombia, India, and Thailand, and a steepener in Russia.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: EM 2s5s Slopes Continue to Normalize

In our monthly recap note, we provide a performance update for our weekly trade recommendations in currencies and rates. We also discuss the new recommendations as well as those that we closed over the past month. We have made a total of 23 trade recommendations so far, of which 17 are in the money.

In our monthly recap note, we provide a performance update for our weekly trade recommendations in currencies and rates. We also discuss the new recommendations as well as those that we closed over the past month. We have made a total of 23 trade recommendations so far, of which 17 are in the money.

Alpha Bites: Performance Summary of Trade Recommendations – September 2021

In this week’s Alpha Bites, we recommend receiving the 10-year rate vs paying the 5-year rate in Thailand. Rate curves in Asia have lagged the rest of EM and the US in flattening since March-end, partly because curves in Asia did not steepen as much in the first place as other EM curves did earlier this year. Also, Asian countries lag in monetary tightening cycles. Among Asian countries, we like a flattener in Thailand as the curve is already pricing in a very weak growth scenario. More recently, the prospect of the government raising its debt ceiling cap has led to the long end underperforming relative to the belly, which we believe should be impacted similarly.

In this week’s Alpha Bites, we recommend receiving the 10-year rate vs paying the 5-year rate in Thailand. Rate curves in Asia have lagged the rest of EM and the US in flattening since March-end, partly because curves in Asia did not steepen as much in the first place as other EM curves did earlier this year. Also, Asian countries lag in monetary tightening cycles. Among Asian countries, we like a flattener in Thailand as the curve is already pricing in a very weak growth scenario. More recently, the prospect of the government raising its debt ceiling cap has led to the long end underperforming relative to the belly, which we believe should be impacted similarly.

Alpha Bites: A Beta-Neutral 5s10s Flattener in Thailand

Thailand

A vanilla interest rate swap is 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.

THB 5Y (TBSWO5 CURNCY)

Alpha Bites: Take Profits on Flattener Recommendations in Thailand and India

I recommend closing flattener recommendations in Thailand and India as rate curves in both countries have begun to price in monetary tightening,...

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: EM 2s5s Slopes Continue to Normalize

EM curves have been normalizing with US long-end rates staying in a narrow range since early July, even after the tapering signal from the Fed...

Gautam Jain, PhD, CFA

Alpha Bites: Performance Summary of Trade Recommendations – September 2021

We provide a performance update of all our trade recommendations along with discussing the new trades from last month. We have made a total of 23...

Gautam Jain, PhD, CFA

Alpha Bites: A Beta-Neutral 5s10s Flattener in Thailand

We recommend a flattener in Thailand as the curve has lagged the flattening in the US and other regions of EM due to growth downgrades delaying...

Gautam Jain, PhD, CFA