Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.

Topic of the week: An overview of the FX market

  • The evolution of the dollar will depend on the risk of recession, inflation, the crisis of regional banks and the debt ceiling;
  • The euro seems vulnerable to an economic downturn, as well as a strong long positioning;
  • The weak yen gives Japan a competitive advantage;
  • The yuan should weaken to support Chinese exporters;
  • The real and the Mexican peso offer attractive carry;
  • Positive real rates should be the market mover for the FX market in this second part of the year.

Market review: Fed: status quo called into question?

  • Markets fully price a 25-bp Fed hike in July;
  • T-note yields hovering about 3.80%;
  • Profit-taking on equities expect for US Tech;
  • Stable credit spreads, sharp tightening in high yield.

Axel Botte's and Zouhoure Bousbih's podcast

  • Review of the week;
  • An overview of the foreign exchange market.

Chart of the week

msci-em-fx-index-and-used-cny-inverted

The Chinese yuan has massively underperformed  the MSCI EM Currency Index.

Since May, the dollar has strengthened sharply in the wake of rising US nominal interest rates.

However, the Chinese authorities seem to tolerate the recent depreciation of the yuan against the dollar if it remains gradual and orderly.

The weakness of the yuan also supports exporters who are suffering from the contraction in manufacturing activity at the global level and the weakness of the yen. 

Figure of the week

For the 1st time, the Earth's average surface temperature is likely to exceed pre-industrial temperatures by 1.5 degrees for at least one year before 2027.

MyStratWeekly : Market views and strategy

Download MyStratWeekly – May 30th 2023
  • Axel Botte

    Axel Botte

    Head of markets strategy

  • Zouhoure Bousbih

    Zouhoure Bousbih

    Emerging countries strategist

  • Aline Goupil-Raguénès

    Aline Goupil-Raguénès

    Developed countries strategist

Reading time : 30 min.
INSIGHTS MARKETS
The fixed income bond market is comprised of different types of debt. Subordinated debt sits at the lower end of the debt stack, just before equity. In case of a default, repayment of subordinated debt will come after the other bond tranches.  This implies that subordinated debt bears a higher risk for investors. Therefore, in return, subordinated debt bonds compensate investors with higher yields. As a result, the asset class offers a compromise in terms of risk and returns, positioning it in the middle of the capital structure, just between equities and senior bond tranches. European banks represent the largest sub-segment of the subordinated debt asset class. This is related to the regulatory framework and its stringent rules in terms of bank capital requirements. Issuing subordinated debt allows banks to increase their capital ratios while at the same time it serves to strengthen their creditworthiness. In 2023, after a turbulent month of March, the subordinated debt market has moved back in the spotlight. The asset class’s valuations have improved, offering an opportunity to gain access to higher yields from subordinated bonds issued generally by investment grade quality signatures. The subordinated debt market is characterised by a strong “euro” bias, resulting from technical factors (European regulatory framework) that favour issuance versus issuing equity to strengthen capital structures. According to Ostrum Asset Management (Ostrum AM), subordinated debt is an instrument which can be used to diversify fixed-income allocations, offering additional yield pick-up. And it can add value to responsible bond allocation as the sustainable subordinated bond market is developing.
10/03/2023
Reserved for pros
Podcast
Reading time : 30 min.
NEWS MARKETS
Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.
09/08/2023
Reserved for pros
Podcast
Reading time : 30 min.
NEWS MARKETS
Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.
09/08/2023
Reserved for pros