Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In our monthly trade ideas recap note, we provide a performance update of the trade recommendations in FX and rates that we make on a weekly basis and discuss those we closed last month. We have made a total of 18 trade recommendations so far, of which 13 are in the money.

In our monthly trade ideas recap note, we provide a performance update of the trade recommendations in FX and rates that we make on a weekly basis and discuss those we closed last month. We have made a total of 18 trade recommendations so far, of which 13 are in the money.

Alpha Bites: Trade Ideas Performance Summary – July 2021

In this week’s Alpha Bites, we recommend receiving the 2-year rate vs paying the 5-year rate in Russia while keeping a paying bias. Russia’s 2s5s curve slope is currently the flattest among liquid EM countries and the only one that is inverted. The flatness was driven by sharply rising inflation leading to aggressive rate hikes by the central bank. If the central bank delivers the rate hikes of over 100 bp that are priced in, then monetary policy would have switched to tightening from the earlier accommodative stance, which combined with inflation peaking in H2 should lead to curve steepening in our view.

In this week’s Alpha Bites, we recommend receiving the 2-year rate vs paying the 5-year rate in Russia while keeping a paying bias. Russia’s 2s5s curve slope is currently the flattest among liquid EM countries and the only one that is inverted. The flatness was driven by sharply rising inflation leading to aggressive rate hikes by the central bank. If the central bank delivers the rate hikes of over 100 bp that are priced in, then monetary policy would have switched to tightening from the earlier accommodative stance, which combined with inflation peaking in H2 should lead to curve steepening in our view.

Alpha Bites: A 2s5s Steepener in Russia with Paying Bias

Russia's rate curve is among the flattest in emerging markets currently. The main driver for the flattening has been the central bank front-loading rate hikes to address the surge in inflation. We expect the curve to steepen from the current extreme levels, but it is early to put on a steepener as the curve has historically continued to flatten until the central bank is done raising rates.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.

Russia's rate curve is among the flattest in emerging markets currently. The main driver for the flattening has been the central bank front-loading rate hikes to address the surge in inflation. We expect the curve to steepen from the current extreme levels, but it is early to put on a steepener as the curve has historically continued to flatten until the central bank is done raising rates.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: Early to Put on a Steepener in Russia

Russia

A vanilla 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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RUB 2Y (RRSWM2 CURNCY)

Alpha Bites: Trade Ideas Performance Summary – July 2021

We provide a performance update of all our trade recommendations along with discussing those we closed last month. We have made a total of 18...

Gautam Jain, PhD, CFA

Alpha Bites: A 2s5s Steepener in Russia with Paying Bias

We recommend a steepener in Russia as short-end rates should come off once the central bank indicates that its tightening cycle is over, which in...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Early to Put on a Steepener in Russia

We expect Russia's curve to steepen from the extreme levels, but it is early to put on a steepener as the curve has historically continued to...

Gautam Jain, PhD, CFA

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52-week Range

Market Cap (USDm)

P/E

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