Around the word

Spring is in the air. Blog pages need to be refreshed. A few charts from around the world.

First on rates, since I don't have much to say and will leave it to the other excellent members of MM blog, except the 5 year looks to have made and held a new range. I am assuming there are lots of players using the 5yr in their spread model, looking for the curve to flatten, though TBH that was a 2014 trade and the 5/30, 5/10 have been in a narrow range since.

5-10 spread. Hasnt done much lately.

Staying in the realm of Fixed Income, we move to Credit, where CCC bonds saw spectacular returns in 2016 and into 2017. They are about 3% off their high.


Benchmark High Yield CDS spreads have ticked ever so slightly higher, though I would caution its to early to really call it a trend change.




For those of us who are not NYC hedge funds trading the CDS contracts or buying CCC bonds (which always have some hair) BB and B bonds are a good proxy for the risk most bond investors are willing to take. Since the beginning of 2017, single B have generally been below 6%, which is not very appealing IMO, but given the alternatives, isn't the worst one can do if you are buying credits you like.

Alternatively, if you move up to BB, good luck finding anything with a 5 handle.

Indeed the BBB spread, has hardly moved. There is little worry about investment grade credits at this time.

Turning towards FX, which I will leave to the other authors in this space to be more specific. The DXY, after doing a nice break out early in the year is right at some critical moving averages now, given the strength in the Euro and Yen of late.


The consensus shorts, of Asian currencies (proxy by the Sing Dollar) show a similar trend. Though to me the LT play is still short, especially given the price of things in Singapore


However EM FX, to this author, has been strong this year, especially given the move in oil. Though to be fair, oil and EM FX wen the opposite way after the US election and are now just closing the gap.(JPM EM FX in White, Oil in Yellow)


But when the beaten down Mexican Peso strengthens for almost 2 months straight, perhaps something has changed. We saw a similar type of move in BRL in 2016. Blow off and then strong reversal.


Where your author does have some interest is in 'other' currencies, like Gold and crypto land

Gold hasn't been able to get above the 200 day recently. Though it did put in a nice 75% retracement in December which would be the maximum allowed if 2016 really was the start of a move higher, according to most voodoo.


In crypto land, bitcoin looks to have topped. Below is  chart in CNY, given that is where most of the specs are.

 Though it seems like other crypto coins, have picked up the slack recently. Your author is pretty cautious on the space here

Turning toward equities, where Europe has seen strong returns to start 2017. Even still IBEX is still far from the recent highs. My guess is we get there after the French elections.

While EM equities have reversed its losses post US election, earnings are no where near where they were 5 years ago (some of that is FX related). But the chart looks good as well.

However if you want to play the global reflation theme, you really should be looking at Asia Ex Japan, IMO. Earnings estimates have been on the rise in 2017

And dont look now, but its been positive almost every day this year.

And the EM heavy weight, South Korea (why are they still considered EM is another question) has seen EPS expectations rise and the KOSPI on the verge of breaking out of a 6 year range. 

 India has also been on your authors watch list, as the Sensex is  now near the post Modi high, though EPS haven't caught up yet.

 

 Lastly the US stock market juggernaut, proxy by the Nasdaq 100, is still growing it EPS and valuation is pretty similar to the past few years. Hard to short stocks like that.

 Happy Q1