The VP Blog
A blog about financial markets and the VP investing framework
SNB may soon come under pressure
We have previously argued that the Swiss National Bank has become slightly more tolerant of modest currency strength, given that the sheer scale of previous FX intervention has dented the central bank’s appetite for further balance sheet expansion. The top-left chart,...
read moreCapital Committed to EM for the time being
In an almost textbook fashion, a stronger dollar and rising US rates has triggered a broad emerging market sell-off and surge in volatility. However, somewhat atypically there is little evidence so far of foreign capital bolting for the exit, despite the gradual...
read moreEM Credit Risk faces Repricing
Credit risk in emerging markets has long been mispriced as the impact of unprecedented monetary stimulus and record low policy rates seemingly placated concerns about higher leverage. However, with the rise in US rates claiming its first casualties (Argentina and...
read moreYield Curve: Forwards Hold some Clues
The 2s10s yield curve continues to grind incrementally lower, but negative carry is becoming a formidable headwind. One year carry on this part of the curve is a punitive 28bps. We are also seeing the forward yield curve struggling to flatten any more (top-left...
read moreIs Fracking Viable?
Bethany McLean has written a book titled Saudi America on fracking and how it might contribute to the next financial crisis. She writes: Some of fracking’s biggest skeptics are on Wall Street. They argue that the industry’s financial foundation is unstable: Frackers...
read moreSwitzerland Facing Effects of Consumer Debt Binge
While the Swiss banking sector has deleveraged over the past decade, the household sector exploited record low interest rates and strong income growth to take on more debt and fund acquisitions in the booming property market. Relative to GDP, household debt is now the...
read morePBoC to take CNHKRW Higher
This post is taken from our August 7th weekly report. USDCNH breached the 6.90 mark last week, having been under 6.30 just four months ago. This 10% depreciation has come against a backdrop of slowing Chinese growth and escalating US trade tensions. Although there...
read moreChina Losing its Edge on Exports
The meteoric rise in Chinese exports now appears to be losing steam with world export market share falling by 1%-point over the last two years and potentially mirroring Japan’s long-term retrenchment. While the sluggish pace of world trade growth since 2008 has...
read moreIf China loses, who wins?
With China taking the brunt of the escalating trade war, we have identified several economies that could benefit from China’s loss (assuming that President Trump continues to focus on China and does not pursue blanket tariffs on all exporting nations). To gauge this,...
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