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Citi's Month-End Model Points to USD, Equity Sales and Rotation Into Bonds

CROSS ASSET
  • Heading into month-end, Citi flag that their prelim estimate for FX rebalancing points to USD sales vs. All others in G10 except the JPY. The signal appears strongest in EURUSD.
  • They add that although fixed income investors are likely to be net USD buyers this month, the overall signal is moderate USD sales due to equity hedge rebalancing flows.
  • The EUR/USD signal is down to the poor performance of Eurozone equities and bonds this month, and the same holds true for GBPUSD also.
  • On asset rebalancing, their model suggests rotation away from equities and into bonds for month-end. The outflow signal for US stocks is the strongest since April 2020, at -2.1 stdev.

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