The CrossBorder Capital Blog

The High Convexity Conviction –  Is The Yield Curve Really Distorted?   This report re-examines the US Treasury yield curve. There are two take-aways. First, what drives the yield curve is unambiguously liquidity, and the latest flattening is entirely consistent with the peak and recent fall-back in US liquidity conditions. Second, the efficacy of the yield curve slope as a predictor of the business cycle is improved enormously when it combines, like now, with high convexity. In short, the fixed income markets are exactly on-track and already starting to discount an upcoming US recession.   We have also included an article that was later published in the Journal of Fixed Income (Spring 2018).     See our latest published research, Global View – The High Convexity Conviction –  Is The Yield Curve Really Distorted? - March 2022    

China and Emerging Market Liquidity: Russia Unplugged?   ·            Ukraine’s invasion is without doubt a major negative for World markets, but it may be even eclipsed by Chinese tightening and higher oil prices? US$130/bbl. oil could smash Global Liquidity lower by up to 30%, driving the World economy into recession   ·            China is again squeezing domestic liquidity conditions. Even ignoring soaring oil prices, based solely on the low ebb of PBoC liquidity injections, World business activity is set to slow further over coming months         See our latest published research, China and Emerging Markets Latest GLI™ – March 2022  

Global Liquidity Latest: Russia Unplugged   ·            Worryingly, the Ukraine Crisis is happening against the backdrop of falling Global Liquidity. Inflation-obsessed policy-makers are unlikely to be deflected.   ·            Each doubling of crude prices cuts Global Liquidity by an average of 25-30%. And, each 10% rise in the US dollar reduces it by a further 12-15%. These are BIG impacts.       See our latest published research, Global Liquidity Latest – March 2022  

It Ain’t Bullish…   The latest market view is that the Ukraine conflict will prove bullish, arguably because it promises to halt and likely reverse on-going Central Bank tightening moves. Dream on. The outlook is simply not bullish…     See our latest published research, Global View – It Ain’t Bullish… - March 2022