David Fuller and Eoin Treacy's Comment of the Day
Category - General

    India Bond Buyers Emerge as Nomura, StanChart Say Worst Over

    This article by Subhadip Sircar for Bloomberg may be of interest to subscribers. Here is a section:

    Is the worst over for India’s much-battered bond market? Standard Chartered Plc and Nomura Holdings Inc. seem to think so.

    The lenders are among investors who are adding to their Indian debt holdings, betting that the central bank will stay on hold for the rest of the year after raising interest rates last week for the second time since June.

    “Current Indian government bond valuations already reflect most of the negative factors the market has been worried about in 2018,” Nagaraj Kulkarni, an Asia rates strategist at Standard Chartered Bank in Singapore, wrote in a note.

    Standard Chartered raised its three-month bond outlook to positive after the Reserve Bank of India kept its neutral policy stance last Wednesday and signaled that its rate increase isn’t the start of an extended tightening cycle. Nomura is bullish on five-year securities and has added to its holdings of debt due 2020, it said in note after the RBI decision.

    “The market had become over-bearish on the quantum and the pace of hikes and is getting repriced,” said R. Sivakumar, head of fixed income in Mumbai at Axis Asset Management Co., which oversees around $11.5 billion in assets. “We advise investors to stay in short-to-medium term strategies.”

    The gap between the RBI’s benchmark rate and the 10-year yield -- a key market metric -- has narrowed to 126 basis points from the year’s peak of 178. Even so, the spread is higher than the five-year average of 75 basis points, indicating further tightening is baked in, Standard Chartered says.

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    Here Are Three Reasons to Short Australia's Dollar

    This article by Ruth Carson and Michael G. Wilson for Bloomberg may be of interest to subscribers. Here is a section:

    The Reserve Bank of Australia is forecast on Tuesday to keep its cash rate target at a record low 1.5 percent, where it’s been for about two years, as it endeavors to breathe life into the nation’s sluggish economy. The Federal Reserve in contrast has raised its benchmark seven times since December

    2015 and said last week it remains committed to further tightening.

    Australia’s 10-year bond yields dropped to more than 30 basis points below their U.S. peers at the end of July and the divergence is expected to keep widening. Markets are anticipating the RBA will stay on hold well into 2019, while the Fed is expected to raise rates another two times this year.

    Positioning data backs up the gloomy assessment. Hedge funds and other large speculators shifted to a net short position on the Aussie of 23,995 contracts on July 24 -- the biggest bet against the currency in more than two years -- after being net long position as recently as May.

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    China Steps In to Support Yuan By Boosting Cost to Short

    This article by Tian Chen for Bloomberg may be of interest to subscribers. Here is a section:

    China stepped in to try to cushion the yuan after a record string of weekly losses saw the currency closing in on the key milestone of 7 per dollar.

    The People’s Bank of China will impose a reserve requirement of 20 percent on some trading of foreign-exchange forward contracts, according to a statement on Friday evening.

    That will effectively make it more expensive to short the yuan, and is a tactic that the central bank used to stabilize the currency in the aftermath of its shock devaluation in 2015.

    The change is aimed at preventing macro financial risks as the currency market shows signs of volatility amid recent trade frictions, the PBOC said. The yuan surged in offshore trading and U.S. stock-index futures turned higher after the news, though the moves pared after China detailed how it plans to retaliate against U.S. tariff proposals.

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    A tiny tweak to sugar is about to make the world's sweets a lot healthier

    This article by Chase Purdy for Quartz may be of interest to subscribers. Here is a section:

    In order to enjoy the sensation of sweetness, sugar molecules have to land on our sweet-tasting receptors, most of which sit on the tip of the tongue. But sugar is notoriously bad at actually hitting those receptors, so bad that only 20% actually makes it, the rest washing down our gullets and into the digestive system. This is one reason why many foods contain so much sugar. It’s also why a lot of food companies, in spite of their efforts, have found it difficult—even impossible—to reduce the amount of added sugar in their products while also maintaining the tastes people expect.

    But a relatively new startup headquartered near Tel Aviv, Israel has developed a super-tiny method that may have cracked what has been an impossible code. In doing so, it sits on the cusp of changing the landscape of food manufacturing by making sugar so efficient that food companies can use 40% less while keeping tastes the same.

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    Bitcoin Whale's Bad Trade Leaves Counterparties Holding the Bag

    This article by Benjamin Robertson, Andrea Tan and Yuji Nakamura for Bloomberg may be of interest to subscribers. Here is a section:

    A massive wrong-way bet on Bitcoin left an unidentified futures trader unable to cover losses, burning counterparties and threatening to dent confidence in one of the world’s largest cryptocurrency venues.

    The long position in Bitcoin futures listed on OKEx, a Hong Kong-based exchange, had a notional value of about $416 million, according to an OKEx statement on Friday and data compiled by Bloomberg. OKEx moved to liquidate the position on Tuesday, but the exchange was unable to cover the trader’s shortfall as Bitcoin’s price slumped. Because OKEx has a “socialized clawback” policy for such instances, it will force futures traders with unrealized gains this week to give up about 18 percent of their profits.

    While clawbacks are not unprecedented at OKEx, the size of this week’s trading debacle has attracted lots of attention in crypto circles. The episode underscores the risks of operating on lightly regulated virtual currency venues, which often allow high levels of leverage and lack the protections investors have come to expect from traditional stock and bond markets. Crypto platforms have been dogged by everything from outages to hacks to market manipulation over the past few years, a period when spectacular swings in Bitcoin and its ilk attracted hordes of new traders from all over the world.

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    Email of the day on Facebook and FAANG

    Many people are worried that Facebook collapse may have wider implications for not only the tech sector but also by contagion the broader market. What do you make of FB and its future and effect on tech / broader market? This is an important question as you know.,,,tech has been a cycle leader many thanks for your continuing good service

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    Corporate Japan's capital spending plans reach 38-year high

    Thanks to a subscriber for this article by Jun Watanabe for Nikkei’s Asian Review. Here is a section:

    The latest survey shows manufacturers boosting capital expenditures by 27.2%. This is due in large part to investment and research and development outlays for electric vehicles, on top of redesigns. Extending ranges for electric autos requires development of better batteries and other onboard components. On that front, chemical and electric machinery makers are expected to step up their own investments.

    For the nonmanufacturing sector, spending is forecast to rise 18.5%. In addition to urban construction projects, contractors are building massive logistics centers to handle a surge in online orders. Construction starts for hotels remain high ahead of the 2020 Tokyo Olympics.

    For the first time in its survey, the DBJ asked companies about the impact of labor shortages. About 60% of nonmanufacturers said a lack of workers is hindering business development. Furthermore, they see the situation growing worse three years down the road. The DBJ expects this to drive more labor-saving investments among retailers and wholesalers.

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    BOE Raises Rates as Carney Unites Panel to Curb Inflation Risks

    This article by David Goodman and Lucy Meakin for Bloomberg may be of interest to subscribers. Here is a section:

    The Bank of England raised its benchmark interest rate to the highest level since 2009 as Mark Carney suggested that inflation is a more imminent concern for the economy than the risk of a disorderly Brexit.

    “With domestically generated inflation building and the prospect of excess demand emerging, a modest tightening of monetary policy is now appropriate,” the BOE governor told reporters in London on Thursday. “The Bank is well-prepared for whatever path the economy takes, including a wide range of potential Brexit outcomes.”

    While the rate increase was widely anticipated, few economists had predicted the Monetary Policy Committee would be unanimous on the move with Britain’s divorce from the European Union on the horizon. The 9-0 vote to lift the rate to 0.75 percent was the second quarter-point increase since November, and the bank’s forecasts suggest it doesn’t see the need for another hike before the U.K. leaves in March.


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