Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>
 QT is effectively dead. We have believed this since the US gilt crisis in 2022, but the SVB issue now confirms it. Game over. QE is back
</li>
<li>2023 will still be volatile. The major markets will range trade, but unlike 2022, investors will enjoy large absolute gains in areas like commodities, EM and cyclicals</li>
<li>Other Central Banks will follow the US Fed. The US Fed is de facto following a bifurcated monetary policy: high rates for inflation and the Fed B/S for financial stability 
</li>
</ul>



 QT is effectively dead. We have believed this since the US gilt crisis in 2022, but the SVB issue now confirms it. Game over. QE is back

2023 will still be volatile. The major markets will range trade, but unlike 2022, investors will enjoy large absolute gains in areas like commodities, EM and cyclicals
Other Central Banks will follow the US Fed. The US Fed is de facto following a bifurcated monetary policy: high rates for inflation and the Fed B/S for financial stability 



The Fed & Global Liquidity After SVB: Climate Change!

<ul>
<li>
Global Liquidity Cycle hit a low in September 2022. It has been rising slowly since and looks set to hit a peak around 2026. Risk assets should get greater support</li>
<li>Yet the large 'carry' on government bonds and the recent sell-off persuades us to allocate towards fixed income for the first time in two years</li>
<li>There are risks. With coupon issuance is set to soar, Central Banks will be increasingly asked to finance monetary inflation
</li>
</ul>



Global Liquidity Cycle hit a low in September 2022. It has been rising slowly since and looks set to hit a peak around 2026. Risk assets should get greater support
Yet the large 'carry' on government bonds and the recent sell-off persuades us to allocate towards fixed income for the first time in two years
There are risks. With coupon issuance is set to soar, Central Banks will be increasingly asked to finance monetary inflation



<ul>
<li>
Global Liquidity has been a key driver of risk assets, but it is starting to skid lower</li>
<li>Problem is NOT tightening of liquidity by Central Banks, rather Collateral pools are wobbling in wake of Japan’s YCC change
</li>
<li>
US Treasury markets face growing challenge from domestic coupon calendar, Fitch downgrade and threat from proposed gold-backed BRICS currency</li>
</ul>



Global Liquidity has been a key driver of risk assets, but it is starting to skid lower
Problem is NOT tightening of liquidity by Central Banks, rather Collateral pools are wobbling in wake of Japan’s YCC change


US Treasury markets face growing challenge from domestic coupon calendar, Fitch downgrade and threat from proposed gold-backed BRICS currency


<ul>
<li>
 Global Liquidity matters hugely for World financial markets. Although Fed Liquidity is slowing, there are compelling signs that liquidity is rising elsewhere</li>
<li>
 Foreign holdings of US dollars are expanding once again, as flow migrate towards Asia. Many policy makers are monetizing these inflows.</li>
<li>
 China’s PBoC  stepped up her liquidity injections, adding RMB 1 trillion to money markets through June. This should have a positive effect on the Chinese and World economies  </li>
</ul>



 Global Liquidity matters hugely for World financial markets. Although Fed Liquidity is slowing, there are compelling signs that liquidity is rising elsewhere

 Foreign holdings of US dollars are expanding once again, as flow migrate towards Asia. Many policy makers are monetizing these inflows.

 China’s PBoC  stepped up her liquidity injections, adding RMB 1 trillion to money markets through June. This should have a positive effect on the Chinese and World economies  


<ul>
<li>
Global Liquidity is a crucial driver of investment markets, and US Fed liquidity refuses to slow down despite fears that policy interest rates will stay high</li>
<li>The key turning-point was last year's British gilt crisis. This was reinforced by the SVB and CSFB banking problem and prompted US banks' reserves to start rising</li>
<li>This US 'Stealth' QE will be underscored by greater Treasury bill issuance, which historically has led the Global Liquidity by six months</li>
</ul>



Global Liquidity is a crucial driver of investment markets, and US Fed liquidity refuses to slow down despite fears that policy interest rates will stay high
The key turning-point was last year's British gilt crisis. This was reinforced by the SVB and CSFB banking problem and prompted US banks' reserves to start rising
This US 'Stealth' QE will be underscored by greater Treasury bill issuance, which historically has led the Global Liquidity by six months


United States

The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1969. MXWO includes developed world markets, and does not include emerging markets. MXWD includes both emerging and developed markets.

MSCI World Index (MXWO INDEX)

The Fed & Global Liquidity After SVB: Climate Change!

Global Liquidity has bottomed and is likely to rise through 2023. Silicon Valley Bank makes this more certain. QT is effectively dead: QE is back

Michael J. Howell

Global Liquidity: Looking Towards 2024

The upbeat narrative continues. Worth re-exploring why Global Liquidity, which has been the main driver of markets in recent years, is set to...

Michael J. Howell

Could Global Liquidity Skid Lower?

Global Liquidity the key driver of risk assets is skidding, NOT from tightening of liquidity by Central Banks, rather Collateral pools are wobbling...

Michael J. Howell

Global Liquidity … Still Rising?

Global Liquidity matters hugely for World markets. Although Fed Liquidity is slowing, there are compelling signs that liquidity is rising...

Michael J. Howell

Is There A ‘Stealth’ QE At The Fed?!

Stealth QE is starting. US banks' reserves are edging higher and the likely jump in bill issuance has historically boosted Global Liquidity. Keep...

Michael J. Howell