The Intelligence Report – 18 July 2017

18 Jul 2017

  • The consequences for the eurozone of unconventional monetary policies becoming conventional – arguing that quantitative easing is proving to be reversible, and exploring the market implications of ECB tapering.
  • When bad news becomes good news for Chinese bonds – examining the rise in onshore bond yields in China, arguing that this process is now mature, and may represent an interesting buying opportunity for contrarian investors.
  • The real Russian equities picture is more than just an oil painting – analyzing the relationship between oil prices and Russian stocks, finding a more nuanced picture in which other drivers provide grounds for optimism

The shift in central bank rhetoric at the recent Sintra meeting has refocused market attention on the prospects for higher interest rates. This phenomenon has been particularly marked in the Eurozone, where core 10 year yields have risen 30 basis points on the back of an apparent hawkish shift in the ECB’s reaction function. In the first article in this TIR edition, Claude argues that quantitative easing is proving to be reversible, and explores the market implications of ECB tapering.

By contrast, Chi Lo looks at the rise in onshore bond yields in China in our second article, arguing that this process is now mature, and may represent an interesting buying opportunity for contrarian investors.

Russian equities performed extremely strongly in 2016, but have suffered this year as hopes of an early lifting of trade sanctions and weaker oil prices have weighed on investor sentiment. In our third article, Vladimir Tsuprov and Egor Kiselev examine the relationship between oil prices and Russian stocks, finding a more nuanced picture in which other drivers provide grounds for optimism.

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