Bloomberg report on Japanese investors, facing ongoing negative rates domestically, are buying dollars and risk assets
- “The presence of the Japanese as the main carry trade driver seems to be growing as they must turn to overseas investments”
- In April, Japan’s money managers bought the most U.S. corporate debt in eight years and the second-highest amount of equities in five years
- “Japanese investors use yen to fund purchases of Treasuries or U.S. corporate bonds, for instance, to seek credit spreads and these flows are continuing,” said Koichi Sugisaki, a strategist at Morgan Stanley MUFG Securities Co. in Tokyo.
Fitch Ratings has revised the Outlook on India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the rating at ‘BBB-‘.
KEY RATING DRIVERS
The revision of the Outlook to Negative on India’s Long-Term IDRs reflects the following key rating drivers:
The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden. Fitch expects economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22. The rebound will mainly be driven by a low-base effect. Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector.
The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1% of GDP by our estimates. Most elements of an announced package totalling 10% of GDP are non-fiscal in nature. Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2% of GDP, although we do not expect a steep rise in spending. Continue reading »
Improved credit access for non-profits – are they referring the vast majority of hedge funds?
Fed proposal to expand its main street lending program to provide access to credit for nonprofit organizations
- says it is seeking public comment on its proposal for nonprofits by Monday, June 22
- proposed expansion would offer loans to small and medium-sized nonprofits in sound financial condition before coronavirus pandemic hit
- interest rate, deferral of principal and interest payments, and five-year term are the same as for main street business loans
There are further T&Cs but I won’t go into them here.
Stocks have worst week in 3 months
The major stock indices rallied into the close but are still selling off the highest levels.
- The stocks have the worst week in 3 months
- Dow and S&P have their 1st positive day after 4 days down
- stocks rebounded after the plunge on Thursday
- S&P index +39.21 points or 1.31% at 3041.31
- NASDAQ index rose 96.02 points or 1.01% at 9588.80
- Dow rose 477.37 points or 1.9% at 25605.54.
- S&P index was up as much as 2.88% but was as low as -0.59%
- Nasdaq index was up as much as 2.91% but was as low as -0.83%
- Dow was up as much as 3.33% but was as low as -0.20%.
- S&P, -4.78%
- Nasdaq, -2.3%
- Dow, -5.55%
Central tendencies and dot plot for June 2020
The last time the central tendencies and dot plot was released was way back in December 2019. At that time, the world was different place.
- GDP 2.2%
- unemployment rate 3.5%
- PCE inflation 1.9%
- GDP 1.9%
- unemployment 3.6%
- PCE inflation 2.0%
- GDP -6.5%
- unemployment 9.3%
- PCE inflation 0.8%
Business Dating Cycle Committee says contraction ongoing
In determining the date of the monthly peak, the committee considers a number of indicators of employment and production. The committee normally views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a clear peak in February.
On a broad sense most commonly used algorithmic strategies are Momentum strategies, as the names indicate the algorithm start execution based on a given spike or given moment. The algorithm basically detects the moment (e.g spike) and executed by and sell order as to how it has been programmed.
One another popular strategy is Mean-Reversion algorithmic strategy. This algorithm assumes that prices usually deviate back to its average.
A more sophisticated type of algo trading is a market-making strategy, these algorithms are known as liquidity providers. Market Making strategies aim to supply buy and sell orders in order to fill the order book and make a certain instrument in a market more liquid. Market Making strategies are designed to capture the spread between buying and selling price and ultimately decrease the spread.
Another advanced and complex algorithmic strategy is Arbitrage algorithms. These algorithms are designed to detect mispricing and spread inefficiencies among different markets. Basically, Arbitrage algorithms find the different prices among two different markets and buy or sell orders to take advantage of the price difference.
Among big investment banks and hedge funds trading with high frequency is also a popular practice. A great deal of all trades executed globally is done with high-frequency trading. The main aim of high-frequency trading is to perform trades based on market behaviors as fast and as scalable as possible. Though, high-frequency trading requires solid and somewhat expensive infrastructure. Firms that would like to perform trading with high frequency need to collocate their servers that run the algorithm near the market they are executing to minimize the latency as much as possible.
Adaptive Implementation Shortfall algorithm designed for reduction of market impact during executing large orders. It allows keeping trading plans with automatic reactions to price liquidity.
Basket Orders is a strategy designed to automated parallel trading of many assets, balancing their share in the portfolio’s value.
Bollinger bands strategy is a trading algorithm that computes three bands – lower, middle and upper. When the middle band crosses one of the other from the proper side then some order is made.
Risk on the theme
- The tension of riding a profit or loss may be quite intense for some investors. By liquidating too early, they are relieved of the tension, and, therefore, the mere termination of this situation will have the same result as a positive experience. They will be more likely to behave the same way in future trades.
- Those who ride losses to unacceptably large amounts also tend to experience the positive effects of relief. Again the relief can serve to reward an otherwise inappropriate act. It’s like the man who, when asked why he kept banging his head against the wall, replied, “because it feels so good when I stop.”