Dollar Funding Shortage set to Continue

The widening of the cross-currency basis (JPY, EUR and GBP, in particular) against the US dollar provides further evidence of a structural dollar-funding shortage, which is set to worsen as the Fed tightens. Although the spread typically widens towards year end, the...

Yield 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...

What’s Good for Workers is Bad for Companies

Recent data from the labour market and the National Federation of Independent Business shows that wages will be picking up quickly this year. The NFIB compensation plans is now at the highest point in the last twenty years. Small businesses expect to raise wages, and...

Headwinds for US Manufacturing

The US manufacturing ISM is currently at levels last seen before the 2008-09 recession. While this reflects the recent optimism about growth prospects in the US, we see several headwinds to the industrial sector. The top-left chart shows the ISM against the VP...

Global Trade and the Dollar

This post is taken from our March 6th weekly report. Once again, trade wars are a potential risk, with Donald Trump threatening to impose tariffs on steel and aluminium imports, and other countries responding that they may impose retaliatory taxes on US goods. The...