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6 Aug 2014
Risk aversion coming full-speed - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, remarks the risk-off trade prevailing in the markets.
Key Quotes
"A strong US non-manufacturing ISM, a build-up of Russian troops on the Ukraine border and a threat of retaliating sanctions from Moscow to the West, have contributed to risk aversion increasing. The market mood has been, for a week now, to sell into any rally in risk assets as investors cut back exposure to emerging markets, corporate debt, equities and any higher-yielding asset other than longer-dated G7 government debt."
"10-year Treasury yields may remain anchored at the bottom end of their range by the geopolitical backdrop, but the front end of the curve continues to reflect the stronger data and the approaching end of the current phase in fed policy. The uptrend in 2-year yields remains in place even if we see a pause today and a flatter US yield curve with rising short-dated rates is dollar-supportive. The defensive mood is likely to persist and will support the US dollar not just this week, but probably through August now."
Key Quotes
"A strong US non-manufacturing ISM, a build-up of Russian troops on the Ukraine border and a threat of retaliating sanctions from Moscow to the West, have contributed to risk aversion increasing. The market mood has been, for a week now, to sell into any rally in risk assets as investors cut back exposure to emerging markets, corporate debt, equities and any higher-yielding asset other than longer-dated G7 government debt."
"10-year Treasury yields may remain anchored at the bottom end of their range by the geopolitical backdrop, but the front end of the curve continues to reflect the stronger data and the approaching end of the current phase in fed policy. The uptrend in 2-year yields remains in place even if we see a pause today and a flatter US yield curve with rising short-dated rates is dollar-supportive. The defensive mood is likely to persist and will support the US dollar not just this week, but probably through August now."