Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

Russia's monetary policy decision tomorrow is a close call with consensus expectations of a 50 bp hike. I expect a smaller 25 bp rate hike but with hawkish messaging. Although inflation increased sharply in September, it was driven primarily by food prices. In the face of rising economic uncertainty due to new restrictions with daily coronavirus cases reaching the highest level, CBR should be cautious in tightening monetary policy. Moreover, the previous rate hikes and the recent currency strengthening should have a disinflationary impact with a lag. If the CBR moves as I expect, it should be supportive of my 2s5s steepener recommendation.Separately, the attached file is a snapshot of the EM 10y rates market in which I seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Russia's monetary policy decision tomorrow is a close call with consensus expectations of a 50 bp hike. I expect a smaller 25 bp rate hike but with hawkish messaging. Although inflation increased sharply in September, it was driven primarily by food prices. In the face of rising economic uncertainty due to new restrictions with daily coronavirus cases reaching the highest level, CBR should be cautious in tightening monetary policy. Moreover, the previous rate hikes and the recent currency strengthening should have a disinflationary impact with a lag. If the CBR moves as I expect, it should be supportive of my 2s5s steepener recommendation.Separately, the attached file is a snapshot of the EM 10y rates market in which I seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Russia to Deliver a Small Rate Hike Supporting the Steepener Recommendation

With the US 10y yield and 5y5y forward inflation expectations rising, the correlation of EM rates with the US has risen sharply. We discuss the reasons behind this along with what it means for EM rates going forward and the strategy to pursue.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

With the US 10y yield and 5y5y forward inflation expectations rising, the correlation of EM rates with the US has risen sharply. We discuss the reasons behind this along with what it means for EM rates going forward and the strategy to pursue.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Correlation of EM Rates with the US Rises Sharply

The rates curve in Brazil has been flattening on a combination of aggressive monetary tightening by the central bank and lowering of the risk premium on a better-than-expected fiscal performance. Given the risks ahead, primarily the rise in political uncertainty heading into next year's presidential election and the likely fiscal slippage, a curve steepener in Brazil offers an attractive entry point to express a bearish view. A low-risk approach to express the same view is via a butterfly.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

The rates curve in Brazil has been flattening on a combination of aggressive monetary tightening by the central bank and lowering of the risk premium on a better-than-expected fiscal performance. Given the risks ahead, primarily the rise in political uncertainty heading into next year's presidential election and the likely fiscal slippage, a curve steepener in Brazil offers an attractive entry point to express a bearish view. A low-risk approach to express the same view is via a butterfly.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Does the Curve Flattening in Brazil Offer an Opportunity?

Colombia's central bank started its monetary tightening cycle last week. The rate hike was in line with our expectations and supported our 2s5s flattener recommendation. We expect the curve to flatten further towards its historical norm on the back of a likely acceleration in the pace of rate hikes with inflation continuing to increase. Despite our expectations, we recommend closing the trade as the high negative carry may cancel the gains if the flattening is gradual.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Colombia's central bank started its monetary tightening cycle last week. The rate hike was in line with our expectations and supported our 2s5s flattener recommendation. We expect the curve to flatten further towards its historical norm on the back of a likely acceleration in the pace of rate hikes with inflation continuing to increase. Despite our expectations, we recommend closing the trade as the high negative carry may cancel the gains if the flattening is gradual.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Take Profits on Colombia 2s5s Flattener

The sell-off in US rates in the aftermath of the hawkish Fed has spilled over to other countries. Within EM rates, we identify the dislocations, which are typical during periods when volatility rises. We are able to explain away most of the dislocations except for Poland and Czechia. Indeed, we have two outstanding trade recommendations in these countries to reflect our view.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

The sell-off in US rates in the aftermath of the hawkish Fed has spilled over to other countries. Within EM rates, we identify the dislocations, which are typical during periods when volatility rises. We are able to explain away most of the dislocations except for Poland and Czechia. Indeed, we have two outstanding trade recommendations in these countries to reflect our view.Separately, the attached file is a snapshot of the EM 10y rates market in which we seek to identify the leaders and laggards among countries by comparing the performance of each to its history as well as to other countries based on their respective betas to an EM rates index.

Rates 10y Dashboard: Identifying Dislocations Among EM Rates as US Rates Sell Off

Czech Republic

A vanila interest rate swap us an agreement between two counterparties to exchange cashflows (fixed vs floating) in the same currency. This agreement is often used by counterparties to change their fixed cashflows to floating or vice versa. The payments are made during the life of the swap in the frequency that is pre-established by the counterparties.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

CZK 10Y (CKSW10 CURNCY)

Rates 10y Dashboard: Russia to Deliver a Small Rate Hike Supporting the Steepener Recommendation

Despite high inflation, Russia should raise the policy rate by less than consensus due to new restrictions as Covid cases have risen sharply. This...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Correlation of EM Rates with the US Rises Sharply

We discuss the reasons behind the sharp rise in the correlation of EM rates with the US along with what it means for EM rates going forward and the...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Does the Curve Flattening in Brazil Offer an Opportunity?

With political uncertainty and fiscal slippage likely to rise heading into next year's presidential election, a curve steepener in Brazil offers an...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Take Profits on Colombia 2s5s Flattener

We recommend taking profits on our 2s5s rate curve flattening recommendation in Colombia. We expected the short end to move higher as the central...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Identifying Dislocations Among EM Rates as US Rates Sell Off

Of the dislocations within EM rates that followed the sell-off in US rates, we can explain away most except for Poland and Czechia, where we have...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)