Daily Brief Macro: JFK's Naval Blockade of Cuba (1962) - Fast Forward 60 Years & A Blockade of Taiwan by China? and more

In today’s briefing:

JFK’s Naval Blockade of Cuba (1962) – Fast Forward 60 Years & A Blockade of Taiwan by China?
The World’s Most Important Market
BoE: Market Tail Wags Policy Dog

JFK’s Naval Blockade of Cuba (1962) – Fast Forward 60 Years & A Blockade of Taiwan by China?

Nancy Pelosi has left Taiwan but the confrontation between China and Taiwan has stepped up to another level.
In the past two days, there have been numerous news flow about an emerging naval/arial blockade of Taiwan by the Chinese military.
An intermittent/prolonged blockade of Taiwan by China could lead to some of the biggest global investors that may reduce their exposures in Taiwan.

A repurchase agreement (repo) is nothing else than a form of collateralized loan, where the cash borrower posts collateral (i.e. a security, for instance a bond) against its loan but he also agrees to repurchase the security back at the end of the agreement.
The collateral “posted” by the cash borrower is basically a form of protection for the cash lender in the event that the borrower becomes insolvent – hence, repo is a secured or collateralized form of lending.
The biggest repo markets in the world use bonds as collateral.

The BoE hiked by 50bps to 1.75%, in line with market and consensus expectations, but contrary to our view that a lack of increased second round effects would mean 25bps.
A reassessment of existing pressures proved more important than the downside news and state-dependent guidance that was needlessly issued and broken.
We now ignore retained guidance about the reaction function and focus on the BoE’s 2yr inflation forecast. GBP pressure will probably underly another 50bp if it occurs.

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