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MARKET TALK: Wednesday saw Mizuho note that "the post-Covid bounce-back is in
full swing, but the risk bid is looking toppy given the increasingly uncertain
global backdrop. Right now it is supported by broad liquidity, ultra-low yields
& idiosyncratic factors e.g. exp. for US stimulus & bullish retail investors.
Consequently, we exp. equity markets to grind lower medium term. The Eurozone
has moved in strides (relative to history) in terms of making the bloc a
coherent unit & the EUR a feasible safe-haven. Consequently we exp. peripheral
EGBs to continue to tighten to core, even when the "risk-on" fades, and for EUR
IG credit to outperform US. Meanwhile, duration has good medium-term potential,
particularly as the market comes around to the reality that (1) renewed
lockdowns (likely incomplete ones) are almost a given, and (2) corporate B/S,
which were bad before, now look particularly fragile. A rising wave of corporate
insolvencies seems unavoidable, even while the govts of the world step in. We
hence see duration having good potential, particularly into the late-Summer when
evidence of the rebound's fading momentum will become evident in the data. We
therefore look for ops to buy duration on any near-term weakness."