Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

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

In this note, we argue that Israel's curve should continue to steepen on the back of the high fiscal deficit amid a rising debt-to-GDP ratio and low year-to-date bond issuance hurting the long end while the short end should remain anchored.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.

In this note, we argue that Israel's curve should continue to steepen on the back of the high fiscal deficit amid a rising debt-to-GDP ratio and low year-to-date bond issuance hurting the long end while the short end should remain anchored.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: Israel’s Curve Should Continue to Steepen

Despite rising inflationary risks, the South African Reserve Bank held rates steady as it continues to focus on growth risks for now. We expect short-end rates to rise gradually, which combined with the risk premium in the long end coming off, should result in curve flattening.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.

Despite rising inflationary risks, the South African Reserve Bank held rates steady as it continues to focus on growth risks for now. We expect short-end rates to rise gradually, which combined with the risk premium in the long end coming off, should result in curve flattening.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: South Africa’s Rising Breakeven Inflation

In contrast with history, EM rates have underperformed the US even as US rates volatility has come off. The main reason for this atypical behavior is the fallout from the unprecedented monetary and fiscal stimulus of last year. A positive outcome is an increase in the number of trading opportunities as a result of this behavior.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.

In contrast with history, EM rates have underperformed the US even as US rates volatility has come off. The main reason for this atypical behavior is the fallout from the unprecedented monetary and fiscal stimulus of last year. A positive outcome is an increase in the number of trading opportunities as a result of this behavior.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: EM Rates Are Underperforming the US

In this note, we discuss the Mexican central bank's most recent monetary policy meeting where it kept policy rates steady while reiterating that it expects inflation to converge to the target next year. We continue to expect the central bank to raise rates this year and emphasize our trade recommendations meant to capture that 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.

In this note, we discuss the Mexican central bank's most recent monetary policy meeting where it kept policy rates steady while reiterating that it expects inflation to converge to the target next year. We continue to expect the central bank to raise rates this year and emphasize our trade recommendations meant to capture that 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: Mexico – Delaying the Inevitable Monetary Tightening

Taiwan

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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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: Israel’s Curve Should Continue to Steepen

We argue that Israel's curve should continue to steepen on the back of the high fiscal deficit amid a rising debt-to-GDP ratio and low YTD bond...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: South Africa’s Rising Breakeven Inflation

Given the rising inflation breakeven in South Africa, we expect short-end rates to rise gradually, which combined with the risk premium in the long...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: EM Rates Are Underperforming the US

In contrast with history, EM rates have underperformed the US even as US rates volatility has come off, which is a fallout from the unprecedented...

Gautam Jain, PhD, CFA

Rates 10y Dashboard: Mexico – Delaying the Inevitable Monetary Tightening

While Mexico's central bank held rates steady at the meeting last week, we continue to expect it to raise rates this year and emphasize our trade...

Gautam Jain, PhD, CFA

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52-week Range

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