IGM Credit, IGM FX and Rates

The Context 12.09.19

09 Dec 2019

Inside this week’s edition of The Context, Financial Intelligence thought leaders discuss: The GBP Week - Bias is Neutral Going into the polling day, we'll maintain a buy dips bias, but expect activity to slow pretty dramatically over coming sessions unless polls take a surprise turn. If Johnson can increase his lead further and maintain a solid 14-15% lead into Thursday then we could see GBP/USD ticking higher still towards 1.32-33, even 1.3500, but in truth we expect more cautious trade than that. South African Bond Investors Are Not Waiting Around For a Moody's Cut to Junk South Africa's benchmark 10-year bond yield is trading at more than 9% and with inflation running at less than half that, means that the government is forced to borrow at one of the highest real rates for any investment grade credit. Asia Credit Insight: Chinese Issuers Fuel Increase in November 69 issuers raised a total of US$33.637bn of funding in the APAC primary US$ market in the month of November from 78 separate tranches, which registered a 4.4% increase month-on-month and a 2.9% rise year-on-year. Read more from The Context and subscribe to have it delivered to your inbox each week!

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PSN Enterprise - Separate Account Analytics Software

PSN Top Guns: Market Resiliency Despite Decreasing Risk Appetite

By Ryan Nauman 09 Dec 2019

Market Resiliency Despite Decreasing Risk Appetite Investors continued to bet on U.S. equities as the domestic economy remained stable, however, uncertainty around trade, global growth, monetary policy, and political chaos continued to keep gains modest. Despite U.S. equities reaching all-time highs and the S&P 500 index producing a +1.70% total return, investors remained cautious, pushing 30-year Treasury yields to record lows. Interest rates around the world continued to fall to record lows while the amount of negative-yielding sovereign debt grew. Furthermore, the Federal Reserve came to the rescue by cutting rates twice during the quarter, providing support for equities, while long-term Treasuries, represented by the Bloomberg Barclays U.S. Long Government/Credit index, produced a +6.58% return during the quarter.

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PSN Enterprise - Separate Account Analytics Software, Zephyr...

Ryan Nauman's Weekly Recap 12.09.19

By Ryan Nauman 09 Dec 2019

It is Fed week again! Next week’s Federal Reserve (Fed) meeting and Chairman Jerome Powell’s follow up press conference lacks some anticipation, as expectations are high that the Fed will keep key short-term benchmark rates in a range of 1.5% - 1.75%. With most expecting the Fed to take a pause in cutting rates, attention will be turned to the Fed’s statement and the follow up press conference to try and decipher the Fed’s monetary policy in 2020. As for economic data, the headliners will be the consumer price index and retail sales. Muted inflation was a primary reason why the Fed cut rates in 2019, and expectations are for inflation to remain soft moving forward. With the holiday season in full stride, retail sales will be widely watched and an important indicator on if the strong consumer will continue to shoulder the U.S. economy. Read more from Ryan Nauman's Weekly Recap and subscribe to have it delivered to your inbox each week!

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EPFR Fund Flows

Equity Funds with SRI/ESG mandates retain momentum as 2019 winds down

By Cameron Brandt 06 Dec 2019

A week after they posted their third inflow record since the beginning of September, Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates took in another $2 billion coming into December as they extended an inflow streak stretching back to the first week of the year. Assets managed by these funds now total over $500 billion, a more than six-fold increase since 4Q15.

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IGM Credit, IGM FX and Rates

China Insight: Bond Inflows Slow Down But RMB FX Little Impacted

By Tim Cheung 03 Dec 2019

Chinese onshore bonds saw a reduction of net inflows to USD2bn in October, down 82% from a month ago (chart 1). Foreign investors' net purchase of CGBs slowed to USD2.2bn, down 70% from September. Meanwhile, policy bank notes and NCDs saw small outflows of -USD0.5bn and -USD0.8bn respectively, vs an inflow of USD2bn to each of them in September. We attributed the slowdown in bond inflows largely to bear-steepening of the CGB yield curve as a result of the growing reluctance of PBOC to ease monetary policy in an environment of rising CPI inflation.

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EPFR Fund Flows

ESG/SRI Investing in the Digital Age for Gen XYZ

By Vik Srimurthy 02 Dec 2019

ESG/SRI Investing in the Digital Age for Gen XYZ Today’s digital age has changed industries. Leading that charge is the technology sector, whose business model depends on harnessing the needs and tastes of Generations XYZ. Doing so involves identifying and understanding their values. These include the growing embrace by these generations of socially responsible (SRI) and environmental, social and governance (ESG) criteria goals. Tech giants such as Google claims they are “Raising the bar in making smart use of the Earth’s resources, expecting the highest ethical standards throughout our supply chain and creating products with people and the planet in mind”. A corner of Amazon’s website talks about how the online retail giant is “driving carbon out of our business”. These sentiments certainly mesh with large segments of their customer base, which is not shy about demanding that they strive for these standards.

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EPFR Fund Flows

Quants Corner

By Vik Srimurthy 02 Dec 2019

South Africa: Bond funds go where equities fear to tread When it comes to picking through the fundamentals of Africa’s most developed economy, “pick your poison” often seems a serviceable operating principle. Anemic growth, high levels of household debt, an official unemployment rate of 29%, an energy parastatal struggling under the burden of $31 billion in debt and an investment grade credit rating hanging by a thread are all part of South Africa’s current narrative. For prudent investors, the case for reducing exposure to the country seems increasingly watertight. However, a more nuanced picture emerges when South Africa is viewed through the lens of mutual fund flows and allocations, and through some of the quantitative models derived from these datasets.

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IGM Credit, IGM FX and Rates

The Context 12.02.19

02 Dec 2019

Inside this week’s edition of The Context, Financial Intelligence thought leaders discuss: Euro High Yield: November Volumes at a High November took the baton from October and ran with it, as high yield corporate issuance (ex financials) in euro topped the previous month's issuance which itself was a two-year high water mark. On a quarterly basis, Q4 is already the busiest quarter in two years. The AUD Week - Bias is Bearish This week, the RBA meet for the last time this year, and while no change is forecast (just 10% chance of a cut being priced), focus will be on the Bank's forward guidance. Turkey Testing U.S. Senators’ Sanctions Patience The Turkish military started testing its S-400 missile defence systems and as planned the system, which Turkey controversially agreed to purchase from Russia in 2017, is on track to be fully operational by April. Read more from The Context and subscribe to have it delivered to your inbox each week!

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IGM Credit, IGM FX and Rates

China Insight: PBOC Constrained by Challenging CPI Inflation

By Tim Cheung 26 Nov 2019

In the Q3 monetary policy report released in the middle of this month, PBOC suggested that the less dovish stance in monetary policy that we have seen since August may continue in the coming months, given the challenging CPI inflation outlook. To avoid public misinterpretation of being "less dovish" as a signal of a shift towards tightening, PBOC on 18 November resumed the 7-day reverse repo to inject liquidity and lowered the reverse repo rate by 5bp to 2.5%, the first reverse repo rate cut in this easing cycle (chart 1). The cut aimed to lower the wholesale funding cost and then to translate into a lower corporate borrowing cost. The magnitude of the cut was small, suggesting PBOC is constrained by the accelerating CPI inflation which reached as high as 3.8% y/y in October.

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IGM Credit, IGM FX and Rates

The Context 11.25.19

25 Nov 2019

Inside this week’s edition of The Context, Financial Intelligence thought leaders discuss: Euro Corp Comment: Multi-Tranchers Drive a Bumper Week, Investors Remain Receptive Investment grade corporate issuers have now led overall euro supply for four consecutive weeks with the asset class last week accounting for 53.7% of the aggregate EUR28.475bn to print in the single currency. Outlook Still Constructive For EM Local Currency Bonds After This Year's Rally Sluggish growth, together with muted inflation has resulted in a broad shift towards more accommodative monetary policy globally and ultimately created compelling opportunities in EM local currency bonds. The JPY Week - Bias is Neutral-to-Bearish Despite a number of firms calling out a lower Usd/Jpy in recent weeks we cannot help but admire its ongoing resilience. We are happy to stay long admittedly at a good level at 107.99 for 111.00-plus on a seasonality basis. Read more from The Context and subscribe to have it delivered to your inbox each week!

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EPFR Fund Flows

Trade, policy debates and weak growth weigh on Europe Funds

By Cameron Brandt 22 Nov 2019

The third week of November saw Europe Equity Funds longest inflow streak since 1Q18 come to an end and redemptions from Europe Bond Funds jump to a 49-week high as investors responded to policy divisions within the continent, slowing economic growth and the continuing headwinds generated by the more protectionist US stance on trade. Spain’s recent election, which saw populist parties make gains and left the region’s fifth largest economy in the hands of a caretaker government, gave investors further reasons for caution. Investors also took a modest step back from some fund groups dedicated to riskier asset classes, with Emerging Markets Bond Funds recording outflows for the first time in six weeks and High Yield Bond Funds posting consecutive weekly outflows for the first time since early June. Overall, EPFR-tracked Bond Funds posted a collective inflow of $6.9 billion during the week ending November while $1.5 billion flowed out of Equity Funds despite the third highest inflow on record for Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates and positive flows to Dividend Equity Funds for the ninth time in the past 10 weeks. The latest week was also marked by a new milestone for the Exchange Traded Funds (ETFs) tracked by EPFR, with the collective AUM of those tracked both daily and monthly hitting the $6 trillion mark.

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IGM Credit, IGM FX and Rates

China Insight: More Small Banks in Trouble as Re-leveraging Underway

By Tim Cheung 19 Nov 2019

The health of China's smaller banks has come under pressure as Yichuan Rural Commercial Bank and Yingkou Coastal bank are said to have suffered bank runs in recent weeks amid fears over poor management and liquidity issues. Earlier this year, a rare government takeover of Baoshang Bank and a state rescue of Jinzhou Bank and Hengfeng Bank raised concerns about the underlying health of hundreds of small banks in China. Admittedly, China has entered another round of re-leveraging, albeit a softer one this time. With the fundamental issue of macro leverage unsolved, we expect China's debt-to-GDP ratio, currently in the 290-300% area, to reach 320% by 2025 (chart 1).  

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IGM Credit, IGM FX and Rates

The Context 11.18.19

18 Nov 2019

Inside this week’s edition of The Context, Financial Intelligence thought leaders discuss: Brl/Mxn Corrects Lower, But Still See Mxn Underperformance in Medium-term Due to Mexico's challenging GDP growth outlook, the reduction of the real rate and lingering risk of credit rating downgrades, we still see scope for Mxn underperformance in the medium-term. Whilst the Brl rally has paused, and for good reason, the arguments we presented for Brazilian economic outperformance remain. Euro Corp Comment: Issuance Slows But it Remains a Seller’s Market It was another active week for the European corporate bond market where another EUR7.455bn printed in the single currency courtesy of eleven issuers (13 tranches). Whilst being a decent total, it did however mark a considerable slowdown from the jumbo EUR11.25bn that hit the tape the week prior. What remained constant though was that there remained plenty of cash directed toward new corporate offerings… The CAD Week - Bias is Neutral to Bearish We get some major releases this week out of Canada, with manufacturing sales, CPI and retail sales being released on Tue, Wed and Fri respectively, but ultimately the most influential topic for the BoC is the ongoing trade war and its effect on domestic industry. Read more from The Context and subscribe to have it delivered to your inbox each week!

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PSN Enterprise - Separate Account Analytics Software, Zephyr...

Ryan Nauman's Weekly Recap 11.18.19

By Ryan Nauman 18 Nov 2019

Over the past few months the housing market has solidified as low mortgage rates have brought buyers back to the market, however, inventory remains low. The week ahead will provide us with more information regarding the housing market turnaround. Additionally, we will receive the initial flash PMIs on the manufacturing and services sectors. Markets have priced in weak manufacturing numbers, however, if there is a bad miss on the downside, markets could react negatively. We are near the third quarter earnings cycle finish line, which has been better-than-expected to this point. The upcoming week is headlined by retailers, which will be widely watched. The economic expansion has been shouldered by the consumer, and in order for the expansion to continue, the consumer will need to continue to spend. We will find out if these brick-and-mortar retailers have capitalized on the strong consumer, what challenges they face with six less shopping days during the shopping season, and if they provide any insight on consumer spending trends moving forward. Read more from Ryan Nauman's Weekly Recap and subscribe to have it delivered to your inbox each week!

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FX & rates insights, IGM FX and Rates

IGM FX Case Study: Banking and Financial Service Provider

13 Nov 2019

Our main sponsor (referred to throughout as ‘MP’), a Senior VP, Sales FX used IGM’s service 12 years prior to moving to BFSP. His initial hesitancy on sourcing economic data from an external data provider was alleviated once he sampled IGM as an intelligence source. Working in a fast-paced environment such as foreign exchange, requires concise, relevant content and IGM’s services were a perfect fit for our main sponsor and his team for day to-day requirements. IGM’s daily information alerts allowed team members to keep abreast of global news in what MP termed, ‘short and sharp content, which can be read 15 minutes prior to the start of a working day, whilst providing a good understanding of the current market’. Read more...

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