The CrossBorder Capital Blog

The Big Macro Themes? What to Watch   This report serves both as a summary of what lies ahead, according to latest Global Liquidity data, and as a re-cap of our methodology. It highlights the three main liquidity transmission channels – financing risk, forex risk and exposure risk – and explains why the quantity, quality (i.e. mix) and positioning of liquidity are critical factors behind future returns. Looking ahead, the confluence of high private sector and high Central Bank liquidity suggests that most of the action will be in yield curves, with more neutral outlooks for currencies and stock markets. However, although stocks look well-supported, our analysis still points to a major rotation towards value.       See our latest published research, Global View - The Big Macro Themes? What to Watch - March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com   ...

US Economic Data Suggest Liquidity Boost is Working   Weekly balance sheet data from the World’s major Central Banks show aggregate liquidity growth slipping to a 20.9%  3m ann. clip. Liquidity growth has slowed across all majors this week , albeit from very different starting points. Once again, Fed liquidity injections are dominating global Central Bank liquidity expansion, with the US monetary base growing at some 56% (3m ann.). This week’s better-than-expected US jobless claims and upwardly revised Q4 GDP would have been well received at the Fed, given its firm commitment to maximum employment. But this is also good news for Global economies and shows that the 2020/21 liquidity boost is working.         See our latest published research, Weekly Global Liquidity Update 26 March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com     ...

Where Are Yields Heading?   The sovereign fixed income markets are the bedrock of the financial system, but they too are facing extreme volatility and huge challenges. Having suffered from a relative dearth of supply in recent years, bond investors now face an unprecedented surge in new issuance. If history is any guide, with or without Fed buying, US bond yields should rise sharply. And, despite Central Bank promises to maintain low or near-zero policy rates, the benchmark 10-year US Treasury note looks set to test 2-2½% yields, with the yield curve steepening sharply.     See our latest published research, Global View - Where Are Yields Heading? – March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com          ——————————————————...

The Fed Pulls Ahead   Weekly balance sheet data from the World’s major Central Banks show aggregate liquidity expanding at a 24.4% 3m ann. clip. The G4 (exc. China) equivalent has jumped to close to 28%. The sharp upturn in Fed liquidity injections is driving this revival. The US monetary base is now growing at 62% (3m ann.) – the fastest pace recorded since mid-2020.     See our latest published research, Weekly Global Liquidity Update 19 March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com                ————————————————————————————————————————————...

Are US Policymakers at Risk of Over-egging the Pudding?   Weekly balance sheet data from the World’s major Central Banks show aggregate liquidity growth picking up to a near-23% clip (3m ann.). Data for the G4 (exc. China) show growth slightly higher at 24%. The Fed has driven the recent upturn, with the monetary base now growing at 41% (3m ann.): at the top of the range established since October 2020. Following on from recent Fed statements affirming its commitment to full employment, the US Government has this week added another huge dollop of targeted fiscal stimulus. Are US policymakers in danger of over[1]egging the pudding?       See our latest published research, Weekly Global Liquidity Update 12 March  2021     For further information, or to change user options, please contact us at crossbordercapital@liquidity.com              —————...

Emerging Market Liquidity: Wrong About China, Wrong About Flows   ·            China is not tightening: February 2021 saw the biggest monthly rise (RMB2.8 trillion) in Chinese Liquidity since March 2020 (RMB3.8 trillion)   ·            Liquidity is key: the simple ratio of all EM equity holdings divided by the pool of domestic liquidity remains undemanding at 0.38 times       See our latest published research, Emerging Markets Latest GLI™ – March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com            ———————————————————————————...

Global Liquidity Latest: When The Rivets Start To Pop!   ·       Strong economies rarely have strong financial markets because liquidity gets redirected into working capital, as inventories are rebuilt and industries re-tool ·       We re-iterate our near-term concerns for markets, but any shake-out is a buying opportunity. We remain bulls for the long term: UK equities continue to look good, and it is too early to write-off Wall Street yet.     See our latest published research, Global Liquidity Latest –   March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com              —————————————————————————...

Fed Liquidity Growth Breaks Higher   Weekly balance sheet data from the World’s major Central Banks show aggregate liquidity growth picking up to 21% (3m ann.). Data for the G4 (exc. China) show a bigger jump to 23.1%. The Fed is behind this upturn, with the monetary base now growing at 37% (3m ann.): close to the top of the range established since October 2020 and underscoring the Fed’s commitment to its recently-articulated full employment target. Elsewhere policy liquidity growth remains range-bound and economic growth is flat-lining in all major economies, even China albeit at a higher level.         See our latest published research, Weekly Global Liquidity Update 5 March  2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com              —————————...

Buckle Up … The Coming Shake-Out   Bonds are suffering their worst (monthly) run since the 1950s in length, if not yet in scale. Worst is set to come because of the strength of the upcoming economic rebound from COVID. We target 2½% for US 10-year Treasuries, but the key movement from here will likely involve rising real yields. Break-evens have already jumped higher. This rise in real rates is also bad news for equities, because historically they only benefit from the early stages of an inflation pick-up. The coming market regime will see equities and bonds begin to more positively correlate (on the downside).       See our latest published research, Global View - Buckle Up …The Coming Shake-Out – March 2021   For further information, or to change user options, please contact us at crossbordercapital@liquidity.com          ————————...