The CrossBorder Capital Blog

Fixed Income Investors Believe Fed Policy-Makers Will Make A Mistake – Could Long Bonds Be A Contrarian Bet For 2022?     Government bond markets may once again be a step-ahead of other assets classes? We are concerned by the prospect of monetary tightening because of the dominant role of Central Banks in providing liquidity. Soaring term structure convexity and a flattening at the back-end of the US Treasury curve point towards ‘stagflation’ and rising credit risks for 2022. In this light, the out-of-favour 10-year US Treasury note may be an interesting investment?       See our latest published research, Global View - Fixed Income Investors Believe Fed Policy-Makers Will Make A Mistake – Could Long Bonds Be A Contrarian Bet For 2022? - October 2021    

Prospects For Global Liquidity in 2022   Global Liquidity is slated, next year, to see its smallest annual increase since 2018, pulled back by the tapering of QE and increases in Central Bank policy rates. This is likely to prove a major headwind for risk asset markets. It also poses bigger risks to funding conditions that could easily tip markets into a more serious sell-off. Three major uncertainties influence our projections: the likely continuing Chinese credit squeeze; the unanticipated Eurozone inflation response and the legacy effect of regulatory constraints on US liquidity.       See our latest published research, Global View - Prospects For Global Liquidity in 2022 - October 2021    

Global Liquidity Latest: A Short Jerk From The IMF?   ·                 The scale of decline in Global Liquidity is not necessarily bearish, as yet, but it does not look especially bullish for asset markets in 2022.   ·                 Tighter Chinese liquidity may well explain the intensity of the latest World economic slowdown. This policy-change represents a significant switch away from ‘growth at all costs’ to ‘stability’, notably for the Yuan.       See our latest published research, Global Liquidity Latest – October 2021  

A Bear Growls! Where Are We In The Investment Cycle?   Global Liquidity matters hugely to asset allocation. The peak and fall in liquidity, spurred by Central Bank tapering and rate hikes, is a major head-wind for 2022. The investment cycle is currently in the ‘Speculation’ phase, with ‘Turbulence’ next up. Here, volatility-based investment strategies and more cash are favoured.       See our latest published research, Global View - A Bear Growls! Where Are We In The Investment Cycle? - October 2021    

The Spectre of Bonds?   US 10-year Treasury yields are leading World Government Bond yields higher, with latest data confirming an upward trend break. However, investors should not read too much into this, because bonds have several moving parts and the ‘front end’ of the term structure is currently dominating the more benign message from the ‘back end’. It is the belly of the curve that looks most interesting, since convexity is likely to keep building and mid-duration yields should rise by more.     See our latest published research, Global View - The Spectre of Bonds? - September 2021    

The End of Build, Build, Build …. And the Start of Help, Help, Help?   Evergrande should be read as a sign of change. China is embarking on a new phase of development that emphasises ‘stability’ over economic ‘growth’ and signals the growing ‘financialization’ of her economy. Evergrande is a signal of tighter Chinese policy control over credit. This sea-change has big implications for the World economy, and the future hegemony of US finance and the role of US dollar. It may end up exposing cracks not only in China’s financial system but  in Western finance too. This report warns Western policy-makers not to dismiss the China threat.     See our latest published research, Global View - The End of Build, Build, Build …. And the Start of Help, Help, Help? - September 2021    

Taper Talk and Taper Walk   Latest weekly balance sheet data from major Central Banks show aggregate liquidity growth ticking up to 9% (3m ann.), but still in the narrow 5-10% range established since June. The G4 (ex. China) equivalent is higher at 10.9%. The Fed continues to outpace all other major Central Banks, having switched direction in July while other majors continued to curtail liquidity growth. Despite assurances of continued monetary accommodation in this week’s policy statements from the Bank of Japan and Bank of England, the data show that liquidity growth peaked in late-Spring and has been trending lower since. And the early-September announcement by the ECB of a slower pace of asset purchases looks to have come after the event : ECB liquidity growth slowed dramatically in mid-June and has not recovered.