The CrossBorder Capital Blog

It Ain’t The Economy…   Long-term bond yields continue to edge higher, hurting collateral, depleting Global Liquidity and souring the mood of investors. The mainstream financial media ascribe this to a hotter than expected real economy and more stubborn inflation. However, our daily estimates of ‘World GDP’ based on factors like cyclically sensitive commodity prices, corporate credit spreads and exchange rates of major exporters show little evidence of either recession or boom. This appears to be confirmed by a conventional nowcast model of World GDP.       See our latest published research, Global View: It Ain’t The Economy… 25 th August 2023  

Global liquidity growth has slowed sharply   Global liquidity growth has slowed sharply. Collateral values are under renewed pressure and bond market volatility has jumped higher. The only positive is that the PBoC has started injecting funds into money markets, and at some pace. History shows that bad things happen when liquidity tightens. So far, global risk markets are holding up, but the risk of financial instability grows with every turn of the screw         See our latest published research, Weekly Global Liquidity Update 18 th August 2023  

The Coming Collapse of the Chinese Yuan? The Chinese Yuan is under pressure. This is because of a fundamental overvaluation of the Chinese real exchange rate of circa 20%, made stark in the wake of America’s technology export ban. But its fragility is being exposed by a ‘weaponization’ of the Japanese Yen. Fear the Yuan? Then, watch the Yen.     See our latest published research, Global View: The Coming Collapse of the Chinese Yuan? 17 th August 2023  

It’s A Duration Crisis, Not (Yet) A Credit Crisis. Bonds, Not Banks Look Dangerous   We face not so much a credit crisis (or at least not yet) involving private debt, but a duration crisis affecting public debt. If this is true, the entire base of the financial system and the trajectory of Global Liquidity are at risk, and policy makers may need to pump in even bigger volumes of Central Bank liquidity to bail the system out.     See our latest published research, Global View It’s A Duration Crisis, Not (Yet) A Credit Crisis. Bonds, Not Banks Look Dangerous - August 2023   For further information, or to change user options, please contact us at research@crossbordercapital.com              ————————————————————————————...

Whoa! Skidding Lower Again…..   ·          Global Liquidity Index (GLI™) pulls back to a low 16.5 (normal range 0-100) ·          World Investors' Risk Appetite at +31.1 (range -50 to +50) highest since 2018 ·          World Central Banks (ex China) are not tightening liquidity, but ·          Problem is fast-ebbing collateral pool , as bond markets sell-off     See our latest published research, Global Liquidity Latest – August 2023  

The Spectre Looming Over Bonds   A consensus trade that hasn’t worked too well in 2023 is to buy long duration government bonds. The US Treasury market has ranged sideways; Bunds have sold off, while UK gilts have retested their September 2022 ‘panic’ lows. Worryingly, the future outlook is not great. Although inflation is skidding, policy interest rates are likely to remain relatively high in the West, especially given robust economic data and underwhelming signs of corporate credit problems. On top, relying on foreign investors to buy the fast-rising coupon supply is becoming more problematic given geo-political tensions. Set against this backdrop, bond term premia are at or near historic lows. Odds are they could rebound and more than offset any plausible fall in policy rates.     See our latest published research, Global View: The Spectre Looming Over Bonds – 22 nd July 2023  

Did Yellen Just Signal A 'Buy' For Markets? ·          Emerging Market Liquidity Index (EMLI) hit 72.5 ('normal' range 0-100) ·          Cross-border Capital inflows above average index at 66.9 ·          Chinese Liquidity Index high 86.0 reading ·          EM Private Sector liquidity robust and not signalling upcoming recession     See our latest published research, China and Emerging Market Latest GLI™ – July 2023