In today’s briefing:
- Bond Market Monitor: A Contempt Against Depositors
- Fixed Income Watch: Zooming in on the Curve Steepening
- CX Daily: Solving China’s Soaring Youth Unemployment
- ECB: Delivering the Required Hikes
Bond Market Monitor: A Contempt Against Depositors
- FDIC’s decision to put Svb Financial (SIVB US) and Signature Bank (SBNY US) under receivership created the worldwide market panic.
- We believe the contagion will be limited to US regional banks which could see rising funding costs and a deposit flight to larger US banks.
- The Fed’s multiple rate hikes in 2022 have finally broken the US regional banks and we expect this event to slow down the rate hikes even further.
Fixed Income Watch: Zooming in on the Curve Steepening
- In general over a 1 year time frame short DXY looks good once the curve is steep
- Especially commodity heavy currencies have a high beta to the dollar scrambles.
- Tech/Consumer Discretionary is probably where you should place your chips, if you are a long only manager given this backdrop.
CX Daily: Solving China’s Soaring Youth Unemployment
Unemployment / In Depth: Solving China’s soaring youth unemployment
Politics / Communist Party rejigs human resources body leadership
Fine / Bohai Bank slapped with $2.5 million fine for 12 violations
ECB: Delivering the Required Hikes
- The ECB delivered another 50bps rate hike, as promised in February and expected. It is not allowing Silicon Valley Bank’s broadly irrelevant failure to break its focus.
- Higher core inflation forecasts extend the problem and necessitate a tight monetary setting to break excessive pressures. ECB policy will rightly be data-dependent.
- We forecast 25bp deposit rate hikes in May and June, with risks skewed towards further steps if resilience outlives the current financial stability issues.
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