Free Trial

Sell-Side Models Point to Month-End USD & Bond Strength, Equity Sales

CROSS ASSET
  • Citi's prelim month-end model writes that both US and foreign equity investors are to be marginal USD buyers in May as US names need to hedge gains in foreign equities and foreign names need to reduce hedges in US equities.
  • From fixed income investors, Citi see net fixed income hedge rebalancing to be mildly USD negative, driven by US investor need to reduce hedges in foreign bonds. The USDJPY buy signal is the only signal to exceed 0.5 SD as Japanese investors likely need to sell JPY to reduce hedges in foreign bond space.
  • For the cross-asset view, their model suggests a need to rotate out of equities and into bonds (at around 0.2 historical SD). They see inflows into both Japanese and the US local equity and fixed income markets.
  • Barclays' FX model corroborates this view, pointing to moderate USD buying into the May close.
  • Worth noting for that the WMR fix for this month falls on Monday 31st May - a UK Bank Holiday - which may prompt some of these flows to be brought forward to the Friday fix instead.

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.