Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

FX & Rates

Our measure of  headline CPI-inflation in developed economies rose further in September by 0.27pp to a 13-year high of about 3.9% yoy. Headline CPI-inflation in EM economies was unchanged in September at about 3.3% yoy.The argument put forward by most developed central banks that high CPI-inflation will prove “transitory” is losing credibility and the Norges Bank, Reserve Bank of New Zealand, Bank of Canada and Reserve Bank of Australia have already taken action. Two-year government bond yields have risen rapidly in the past month in most developed economies. This suggests that markets increasingly think that CPI-inflation will remain sticky at high levels for the foreseeable future and that (most) developed central banks will have little choice but to start to or further tighten monetary policy in the near future.However, analysts are less hawkish overall than markets. Our view is of a (partly) self-defeating prophecy, with the surge in short-end bond yields having de-facto resulted in a tightening of monetary conditions, which in turn reduces the odds of central banks hiking rates as aggressively as currently priced in by markets.We expect the Fed at its meeting tomorrow to once again put some distance between the start of the QE taper and the start of the rate hiking cycle. US household consumption is now running slightly above its long-term trend but there is still a $1.1 trn “pandemic shortfall”. Moreover, slower household consumption growth in recent months (albeit from a high level) has led to weaker demand-pull inflation and contributed to the fall in month-on-month PCE-inflation, in our view.

Our measure of  headline CPI-inflation in developed economies rose further in September by 0.27pp to a 13-year high of about 3.9% yoy. Headline CPI-inflation in EM economies was unchanged in September at about 3.3% yoy.The argument put forward by most developed central banks that high CPI-inflation will prove “transitory” is losing credibility and the Norges Bank, Reserve Bank of New Zealand, Bank of Canada and Reserve Bank of Australia have already taken action. Two-year government bond yields have risen rapidly in the past month in most developed economies. This suggests that markets increasingly think that CPI-inflation will remain sticky at high levels for the foreseeable future and that (most) developed central banks will have little choice but to start to or further tighten monetary policy in the near future.However, analysts are less hawkish overall than markets. Our view is of a (partly) self-defeating prophecy, with the surge in short-end bond yields having de-facto resulted in a tightening of monetary conditions, which in turn reduces the odds of central banks hiking rates as aggressively as currently priced in by markets.We expect the Fed at its meeting tomorrow to once again put some distance between the start of the QE taper and the start of the rate hiking cycle. US household consumption is now running slightly above its long-term trend but there is still a $1.1 trn “pandemic shortfall”. Moreover, slower household consumption growth in recent months (albeit from a high level) has led to weaker demand-pull inflation and contributed to the fall in month-on-month PCE-inflation, in our view. 

Hawkish Rates Markets Ahead of Themselves

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

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

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

USD domino decline gaining traction with the Euro above our 1.1610 pivot barrier. USD weakness (DXY 94.50 top call) leading a peak in the 5yr and 10yr yield. USD/JPY next line at the key 114.50 major top barrier.The Euro is the latest currency to make a move. The dollar started its descent in August/September vs commodity currencies and rolled into stronger EM FX and more recently marked tops in the USD/KRW and USD/THB.Yield peak targets outlined that will provide fuel for a weaker USD, stronger metals and a short financials pair versus sectors that benefit from a yield backfill.

USD domino decline gaining traction with the Euro above our 1.1610 pivot barrier. USD weakness (DXY 94.50 top call) leading a peak in the 5yr and 10yr yield. USD/JPY next line at the key 114.50 major top barrier.The Euro is the latest currency to make a move. The dollar started its descent in August/September vs commodity currencies and rolled into stronger EM FX and more recently marked tops in the USD/KRW and USD/THB.Yield peak targets outlined that will provide fuel for a weaker USD, stronger metals and a short financials pair versus sectors that benefit from a yield backfill. 

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Two trends that are becoming clearer in these markets is the rise in yields and the rise in energy prices.Together they spell out a ‘reflationary’ stance which is inter-related to the market preparing for Fed tapering asset purchases. This is further supported by the recent move higher in US breakevens which are now set to trend up. While these may appear to be positive developments and signs of markets moving in the right direction, they do not come without risks.

Two trends that are becoming clearer in these markets is the rise in yields and the rise in energy prices.Together they spell out a ‘reflationary’ stance which is inter-related to the market preparing for Fed tapering asset purchases. This is further supported by the recent move higher in US breakevens which are now set to trend up. While these may appear to be positive developments and signs of markets moving in the right direction, they do not come without risks.

As rates in the US have started rising again, their correlation with EM rates has reasserted. We compare the current sell-off with the 2013 Taper Tantrum and the one earlier this year, which shows that the sensitivity of EM rates to the US has increased. While the increase in the beta leaves EM rates more vulnerable to a continued rise in the US rates, we are inclined to look for oversold levels in select EM countries to receive long-end rates hedged with payers or initiating flatteners.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.

As rates in the US have started rising again, their correlation with EM rates has reasserted. We compare the current sell-off with the 2013 Taper Tantrum and the one earlier this year, which shows that the sensitivity of EM rates to the US has increased. While the increase in the beta leaves EM rates more vulnerable to a continued rise in the US rates, we are inclined to look for oversold levels in select EM countries to receive long-end rates hedged with payers or initiating flatteners.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: Rising Sensitivity of EM Rates to the US

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US Treasury (10 Yr Generic) (GT10 GOVT)

Hawkish Rates Markets Ahead of Themselves

CPI-inflation is proving sticky and markets pricing further developed-economy rate hikes in coming months. We think they've got ahead of...

Olivier Desbarres

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

Weak Dollar Leading Yield Top

USD domino decline gaining traction with the Euro above our 1.1610 pivot barrier. USD weakness (DXY 94.50 top call) leading a peak in the 5yr and...

Thomas Schroeder

Bonds & FX: Navigating Another Taper

As US yield rise with higher energy prices, we attempt to provide clarification in FX markets where some emerging markets are at risk of suffering...

Shyam Devani

Rates 10y Dashboard: Rising Sensitivity of EM Rates to the US

When we compare the current sell-off in EM rates with the 2013 Taper Tantrum and the one earlier this year when US rates sold off similarly, we...

Gautam Jain, PhD, CFA

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