A victim of its own strength

The Swiss National Bank’s sight deposits—that is, the amount of cash commercial banks leave with the SNB—has jumped sharply since last month. Typically, a rise in sight deposits suggests that the SNB is intervening in currency markets to weaken the franc. It clearly isn’t working. The Swiss franc has rallied relentlessly vs. the euro This […]

Will autos be the first crack in credit?

Delinquencies (90+ days) in auto loans and leases continue to rise, as they approach all-time highs. Outstanding auto loan balances were up almost 5% in Q2, and are fast approaching a record USD 1.3tn. What is most notable is the divergence between delinquencies and the unemployment rate. One of the reasons for this is 50% […]


Is China a currency manipulator? While there is little doubt that the recent RMB depreciation occurred without PBOC approval, it isn’t clear China meets the three criteria to be considered a manipulator. China does run a significant bilateral trade surplus with America, but the other two points are less clear cut. Is China’s current account […]

Shorting Japan

Japanese equities are taking a beating this week. Its earnings season over the next few weeks appears particularly gloomy. Over the last 12 months, the global growth slowdown has been especially troublesome for Japanese equities, which have steadily unperformed DM equities. The underperformance has also been a common theme in the 12-months leading up to […]

Sticking with hard currency bonds

While EM debt been on a strong run since last September, the local currency bonds have been lagging their hard currency peers since this past March. We expect this divergence to continue for two reasons. Firstly, the weakness in oil prices and EM trade flows should continue to weigh on global FX reserves. This should […]

Re-fixing the Yuan

One of the biggest losers from the recent flare up in trade tensions between the U.S. and China was the Yuan. In response, the PBOC lowered its official Yuan mid-point to USD 6.8649 to minimize further currency weakness. However, this has led to a widening spread between the onshore (CNY) and offshore (CNH) exchange rate, […]

Buying safer assets

Despite a strong recovery in stock prices this year, inflows into equity ETFs and mutual funds have remained uneven. At the same time, inflows into products that track bonds have been resilient. This suggests that weak global growth, trade war concerns, and worries about earnings have weighed on investor sentiments, even as the S&P 500 […]

Understanding the curves

Crude oil has rallied by nearly 40% year-to-date. However, this recovery was arguably driven by temporary geopolitical factors (supply outages in Iran & Venezuela), which is reflected by a steadily rising front-end of the futures curve. In contrast, the long-end of the curve, which reflects the long-term outlook of both supply and demand has remained […]