Share this page!

Varad Markets Profile picture
Twitter logo
15 Jun, 4 tweets, 2 min read
Three largest Asians may end up with early tightness:
▪️ #China: Never went too accommodative to start with + credit tightening
▪️ #India: Inflation surge may force RBI's hands
▪️ #Korea: BoK increasingly hawkish

KRW 2y IRS +17bp since May MPC
INR 5y NDOIS +11bp post CPI yday ImageImage
BoK's recent hawkishness => rates sell off (higher yld) v/s Received rates positioning:
🔹 'Normalization should not be put off too much'
🔹 'Rapid debt rise may hurt consumption'
🔹 'Should secure policy room for future issues'
🔹 'Inflation may accelerate faster than expected'
India: Inflation surge

Key to see how RBI interprets the CPI data - transitory or persistent?

China: Credit tightening

• • •

Missing some Tweet in this thread? You can try to force a refresh
　

Keep Current with Varad Markets

Varad Markets Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @VaradMarkets

Varad Markets Profile picture
13 Jun
#China Credit Tightening?

▪️ Aggregate Financing AFRE or Total Social Financing TSF growth slowed to 11% yoy May v/s 11.7% Apr
▪️ Renminbi RMB Loan growth inched down to 12.2% yoy May v/s 12.3% Apr
▪️ Optically Broad Credit YoY charts look scarier than they actually are

1/9 ImageImage
▪️ To start, target Fiscal Deficit 3.1% in 2021 v/s over 3.6% in 2020 => bound to be fiscal tightening by design
▪️ AFRE outstanding stock indeed points to recent marginal slowdown relative to post-COVID trend
▪️ But AFRE stock still above more longer term (4yr) trend

2/9 ImageImage
▪️ Credit did tighten in 2021 v/s exceptional surge in 2020 (base effect) but 2021 still ahead of pre-COVID yrs of 2017-19 => better call it credit 'normalization'
▪️ Govt completed only ~25% of 2021 bond issuance in first 5m of yr => backloaded => likely pickup in H2'21

3/9 Image
Read 9 tweets
Varad Markets Profile picture
2 Jun
Role of #USD & #EUR in Global Monetary System:

[Charts from ECB Paper: 'International Role of Euro']

#Dollar continues to dominate FX Reserves, International Debt, Loans, Deposits, FX Turnover & Global payments

1/7
FX Transactions settled in CLS System (Continuous Linked Settlement)

▪️ USD led FX market => involved in ~90% of all settlements in Dec'20
▪️ EUR second most actively settled ccy

2/7
FX Share in Global FX RESERVES:

Sub-thread below

3/7
Read 7 tweets
Varad Markets Profile picture
31 May
US #Inflation #DiveIn: CPI v/s PCE
Also why FED follows PCE?

▪️ Attached Summary of differences
▪️ Since 2000, overall CPI ~11% higher than PCE

▪️ Definition:
🔹 CPI: Out-of-pocket spending by non-institutional Urban Consumers
🔹 PCE: Includes Rural & all personal sector
1/12
Four Sources of differences: Scope, Formula, Weight, Others Effects

1⃣ Scope Effect:
🔹 CPI: Consumer Price Index => Survey of Households
🔹 PCE: Personal Consumption Expenditure => Survey of Businesses
▪️ 25% of PCE spending not captured by CPI

2/12
▪️ PCE includes spending by Govt, Firms, Non-Profits on behalf of Households
- E.G: Medical spending = Direct purchases by Consumers + Spending on medical goods & services by Medicare OR Employer's Health Insurance
- E.G: Public school education not an out-of-pocket spending
3/12
Read 12 tweets
Varad Markets Profile picture
17 Apr
#INR Macro check

▪️ #USDINR last 74.35 => ~1.4% off 75.35 highs => RBI's persistent #USD selling above 75.00 => with soft DXY, s/t consolidation in 74.00-75.35?

▪️ Risk Reversals, good gauge of nervousness, off highs (+1.6=>+0.9 vol) => less demand for USD Calls

1/11
▪️ Various economists revised India's GDP forecast lower
▪️ Good summary by @latha_venkatesh below
▪️ RBI GDP Projection +10.5% yoy FY 21/22 (Apr MPC)
▪️ Chart below: graphical overview of GDP trajectory - not that bad but whether worse yet to come?

2/11
▪️ When GDP collapses =>Trade Deficit tends to improve=>lower imports on poor aggregate demand
▪️ Q2 Apr-Jun'20=>massive reduction in trade deficit as GDP collapsed
▪️ Assuming only mild GDP hit in this COVID wave, associated trade deficit improvement should also be smaller

3/11
Read 11 tweets
Varad Markets Profile picture
12 Apr
#US #CPI March #Inflation tomorrow:

🚩Headline Exp 2.5% (vs 1.7% Feb)
🚩Core Exp 1.5% (vs 1.3% Feb)

▪️ That +1.0% gap would be largest Headline v/s Core CPI gap since 2011 on huge Energy driven base effects; 5yr avrg gap -0.20%, 2yr avrg -0.37%

1/4
▪️ Chart: Energy Inflation indeed so volatile
▪️ Food Inflation key contributor since COVID - likely to ease off marginally on base effects
▪️ Energy base effect => massive spike to Headline over Apr/May => Headline vs Core likely to diverge further

@chigrl
2/4
▪️ Energy Inflation, negative recently, was +2.4% Feb, could jump to as high as +8.5% yoy in Mar & +20% in April
▪️ Energy Index collapsed Apr/May'20 but Food Index jumped => opposite base effects

3/4
Read 4 tweets
Varad Markets Profile picture
12 Apr
US Swaption/Rates Vol off highs but still elevated

Reasons:
▪️ Economic data ahead; CPI tom; Fed data dependent
▪️ UST supply, 3y 10y 30y auctions this wk
▪️ US ylds, off highs, still close to higher end => risk premium in vols
▪️ Market v/s Fed disconnect on Rate Hike

1/4
▪️ SEP-based June FOMC important => till then would have got two more NFPs & Inflation data till May incorporating Apr/May base effect + stimulus based spikes => little kink around 3m in vol curve
▪️ Vol Skew mildly softer but still topside nervousness (convexity hedging)

2/4
▪️ Chart: 3m Expiry Vol across Swap Tenors => Front end swap tenors least volatile as anchored by Fed Fund/OIS/T-Bill yields

▪️ Chart: 3m10y Swaption Vol v/s 10yr US Yield: higher yield => higher vol as reflected in Vol Skew

3/4
 @bondstrategist
Read 4 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!

Like this author's thread?

Get emails when @VaradMarkets has new unrolls!

Check out other threads from @VaradMarkets!

Read all threads by @VaradMarkets

:(