Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>In line with my view, the US dollar remains strong, with the invasion of Ukraine by Russia providing additional safe-haven bids and putting pressure on EM currencies. </li>
<li>Among EM currencies, the worst hit are Central European currencies as the war has created headwinds to growth in the region especially due to the spike in energy prices.</li>
<li>Authorities in the eurozone and Central Europe have taken steps to mitigate the impact on their economies but the proximity to the war means that some risk premium will remain.</li>
</ul>


In line with my view, the US dollar remains strong, with the invasion of Ukraine by Russia providing additional safe-haven bids and putting pressure on EM currencies. 
Among EM currencies, the worst hit are Central European currencies as the war has created headwinds to growth in the region especially due to the spike in energy prices.
Authorities in the eurozone and Central Europe have taken steps to mitigate the impact on their economies but the proximity to the war means that some risk premium will remain.


In the Line of Fire – Impact on Central European Currencies from Russia’s Invasion

<ul>
<li>US rates are trapped between inflationary pressures on one hand, and risk aversion and growth uncertainty on the other, with the latter dominating for now.</li>
<li>The previous strong correlation of EM rates with the US has now flipped as they continue to rise even with US rates rallying.</li>
<li>The spread of EM rates to the US is at its widest in a decade but it should remain that way as long as rates volatility remains high.</li>
</ul>


US rates are trapped between inflationary pressures on one hand, and risk aversion and growth uncertainty on the other, with the latter dominating for now.
The previous strong correlation of EM rates with the US has now flipped as they continue to rise even with US rates rallying.
The spread of EM rates to the US is at its widest in a decade but it should remain that way as long as rates volatility remains high.


EM Rates Detach from the US Amid Russian Contagion

<ul>
<li>In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.</li>
<li>Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.</li>
<li>I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.</li>
</ul>


In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.
Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.
I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.


Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022

<ul>
<li>Long-End rates in Central European (CE) countries are close to the highest in five years due to inflationary pressures arising from overheating economies and highly negative real rates.</li>
<li>The spread between CE and the eurozone is close to its widest in at least a decade because, unlike the eurozone, these countries have been hiking rates aggressively.</li>
<li>The spread is a function of the inflation differential between the regions. With inflation peaking in the coming months and the eurozone yet to start hiking, the spread should narrow.</li>
</ul>


Long-End rates in Central European (CE) countries are close to the highest in five years due to inflationary pressures arising from overheating economies and highly negative real rates.
The spread between CE and the eurozone is close to its widest in at least a decade because, unlike the eurozone, these countries have been hiking rates aggressively.
The spread is a function of the inflation differential between the regions. With inflation peaking in the coming months and the eurozone yet to start hiking, the spread should narrow.


Alpha Bites: Receive Poland 10y Vs Pay Eurozone 10y Local Rate

<ul>
<li>Following the invasion of Ukraine by Russia, it is only a matter of time before the US and other western allies impose a new set of economic sanctions on Russia</li>
<li>A directive from the US Treasury this week expanded the restrictions on Russian bonds as it prohibits participating in the secondary market of new bonds, thereby cutting financing for Russia. </li>
<li>With new sanctions on the way, the risks to Russian bonds have increased. I list the possible risks for holders of Russian bonds under different scenarios.</li>
</ul>


Following the invasion of Ukraine by Russia, it is only a matter of time before the US and other western allies impose a new set of economic sanctions on Russia
A directive from the US Treasury this week expanded the restrictions on Russian bonds as it prohibits participating in the secondary market of new bonds, thereby cutting financing for Russia. 
With new sanctions on the way, the risks to Russian bonds have increased. I list the possible risks for holders of Russian bonds under different scenarios.


Risks to Russian Bonds from Escalating Sanctions

Poland

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.

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In the Line of Fire – Impact on Central European Currencies from Russia’s Invasion

Russia's invasion has given another leg up to the US dollar, weighing on EM currencies, particularly in Central Europe despite the steps they have...

Gautam Jain, PhD, CFA

EM Rates Detach from the US Amid Russian Contagion

The spread of EM rates to the US is at its widest in a decade but it should remain that way as long as rates volatility remains high, given the...

Gautam Jain, PhD, CFA

Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022

I provide a performance update of all my trade recommendations along with discussing the open trades. I have closed 25 of the 35 trades recommended...

Gautam Jain, PhD, CFA

Alpha Bites: Receive Poland 10y Vs Pay Eurozone 10y Local Rate

The spread between the local rates in Central European countries and the eurozone is close to its widest in at least a decade. With inflation...

Gautam Jain, PhD, CFA

Risks to Russian Bonds from Escalating Sanctions

With new sanctions on the way, the risks to Russian bonds have increased. I list the possible risks for holders of Russian bonds under different...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)