The VP Blog
A blog about financial markets and the VP investing framework
EM 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,...
read moreRUBCAD to Catch up to Crude Oil
RUBCAD tends to be a FX pair that’s highly correlated with moves in Brent (top-left chart). The main appeal of RUBCAD as a relative-value trade against crude is that there is much less direct US dollar exposure from the trade. Both Russia and Canada are dependent on...
read moreUnderstanding EM Crises
We recently published a new white paper on EM Crises. In this report, we look at the history of EM crises. How they unfold, and when they become buying opportunities. EM crises have generated some of the largest market sell-offs in the last 25 years. At the same...
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