Daily Brief Macro: Why Are Bond Yields Rising As Rates Are Cut? and more

• Fed interest rate policies have not followed traditional patterns, with long-term rates decoupling from short-term rates
• The economic shock of Covid-19 has led to increased focus on inflation and uncertainty in the bond market
• Fed Chairman Powell’s actions and fiscal policy responses have contributed to changing economic dynamics and interest rate outlooks

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• Welcome to our weekly editorial on everything macro, where we cut through the noise and deliver contrarian takes on macroeconomics, liquidity, tradeable themes, and everything in between.
• Reciprocal tariffs is a concept you’ll need to familiarize yourself with.
• Despite Trump’s press conference last week being a confusing mess, lacking clarity on geographies, products, and specific tariff/VAT rates targeted in this tit-for-tat approach, the aim seems crystal clear: Trump wants a global response, and it could very well lead to globally lower tariffs and VAT rates.

• Maintain structural overweight on Indian equities but hedge against rupee weakness
• While buy and hold investors should be looking to buy on dip, the attraction of India as a hedge against Trump’s  global trade war and China has diminished. 
• That said fundamentals – corporate and bank balance sheets – are strong, the corporate profit cycle is in upswing and the real cost of capital is within the normal range.  

• The U.S. oil and gas rig count rose for the third consecutive week, increasing by 2 to 588 for the week ending 14/Feb.
• For the week ending 07/Feb, U.S. oil production moderately rose to 13.49m bpd from 13.48m bpd the week prior.
• The number of  U.S. oil rigs rose by 1 to 481, while gas rigs grew by 1 to 101. Rig count in the Permian basin rose by 1 to 304.  

• The misinterpretation of the recent Trump/Putin phone conversation by the commentariat partly explains why markets are currently ahead of the curve on Russia/Ukraine issues.
• As long as European leaders continue to deny the state of transatlantic relations, the situation remains uncertain.
• Given the current circumstances, investors should proceed with caution, keeping in mind the principle of ‘caveat emptor’ (buyer beware).

• Eurodollar trading up towards highest level since late January, European equities surging
• Ongoing threat of US tariffs and sticky inflation data partially offsetting positivity
• Discussion with economists on implications of potential peace deal, tariffs, and upcoming UK data in Europe and UK.

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•  Smallholders keep inventories as tire makers make guarded purchases  
• Wintering over, next season may start by March end  
• Indian Government ups Budget allocation for Rubber Board

• The past week saw insights on Kalbe Farma (KLBF IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ), DBS (DBS SP), and Paragon REIT (PGNREIT SP).
• There was also a macro insight on the Philippines, and further insights on DigiPlus Interactive (PLUS PM) and Airports of Thailand (AOT TB).
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• Strength in January CPI does in part reflect residual seasonality, but continued stalling of progress in yr/yr growth is of concern.
• This revives concerns that the economy may need to slow to return inflation to the 2.0% target, something tariffs are likely to make more difficult.
• Uncertainty is high, but we now expect only one 25bps easing in 2025, which is likely to come late.  We expect the Fed to remain cautious through 2026.

• Baseline assumption of ceasefire between Russia and Ukraine in Year Ahead outlook published in November
• Potential for restarting Russian pipeline gas flows to Europe as part of negotiated end of conflict
• Estimated additional 40 bcm per annum of supply to Europe, impacting TTF price forecast in 2025

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.