We met with clients across the US last week to discuss opportunities heading into 2015
• Post-OPEC, the focus was heavily on oil; moves in trade-weighted FX had less focus
• Risk addition is likely to be light into year-end; currency wars will rem...
• New allocations charts show ongoing short-covering that will continue to support Thai bonds and FX
• Direction signal back to positive: add new long 5Y THB bonds vs pay 5Y swaps
• Spread signal shifts down to neutral, supporting low-yield bonds ...
Direction and spread signals stay positive for the third consecutive month
• These signals support our view that EM yields will fall and high-yielders will outperform
• Relative-value signals support our positive Thai 5Y bonds and Overweight COP F...
South African bonds are well placed to benefit from the new and strongly positive EM bond signals
• Our directional signal has now turned positive: investors in aggregate are now buying, not selling
• Our spread signal has now turned positive, s...
Our directional signal for EM bonds has turned negative for the first time since July
• Outflows from EM funds are accelerating, hurting risk appetite and triggering EM bond selling
• Fundamentally, we are neutral on EM bonds, as we expect Fed QE ...
• We previously analysed aggregate foreign positioning in local currency in SC FIRST, assessed our own data sources for a more accurate fund-flow analysis, and generated insights on foreign-investor heterogeneity
• We can now generate insights on d...
To paraphrase Mark Twain, the reports of the death of EM bond markets have been greatly exaggerated. Increased global allocations to local EM bond markets have been not cyclical but primarily structural in nature, reflecting these markets’ rising ec...
Our sensitivity indicator of yield vs. positioning is falling; EM/DM yield spreads to widen near-term
• Within EM, low-yielding bonds to outperform high-yielding as the sensitivity of positioning to yields falls
• Investors should keep exposure to...
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