Weekly Intelligence Report – Treasury curve, US dollar movements and Brazil

22 Mar 2016

Global financial markets continue to be driven by surprises in central bank policy and rhetoric. In last week’s Weekly Intelligence Report, we argued that markets had under reacted to the significant policy measures announced by the European Central Bank on March 10th. The subsequent firming of European corporate bonds and equities has tended to support that view. The market’s reception to the March 17th Federal Open Market Committee statement and Yellen testimony was less ambiguous; the overall communication package was widely viewed as dovish, and supportive of growth and risk assets. Market price action has reflected this.

Steve Friedman’s analysis of last week’s FOMC can be read in “March FOMC: Global risks come to the fore” and reflected this. In the first of our articles in this publication, Steve explores the conundrum posed by the continuing unusual flatness of the US yield curve, and warns that the current suppressed levels of term risk premia may not persist.

Adnan Akant, Head of Currencies, examines the recent consolidation of the US dollar, which has been reinforced by last week’s dovish FOMC, and draws some more positive conclusions on the prospects for commodity and emerging market currencies.

Lastly, L. Bryan Carter and Lewis Jones, respectively Head of Emerging Markets Fixed Income and Portfolio Manager, Emerging Markets Fixed Income, turn a spotlight on recent dramatic political and market developments in Brazil, and pose the question of whether we are witnessing an inflection point in the crisis.

There will be no edition of the Weekly Intelligence Report next week, given the upcoming holidays. The next edition will be published on Tuesday April 5th.

Happy reading!

Download to read more