Arbitrage

With the U.S. equity market under selling pressure in early September, the MSCI World has registered its worst week since late March, down almost -1.5%.

Market conditions have been supportive since early July, but the flattening of the Treasury curve raises questions about the probability of a U.S. recession next year. Fund manager surveys suggest investors have erred on the side of caution lately...

Market developments in May saw some trend reversals across the fixed income and commodity space. On the one hand, the unfolding of the Italian political crisis coincided with a rebound of U.S. Treasuries during the second half of May. On the other hand...

Europe took center stage this week, with further developments in the Italian political saga reminding investors that there are still powerful Eurosceptic forces at play and forcing investors to end their hopes of meaningful eurozone reforms. However, fading prospects of another election in the near term are providing a respite.

Last week, equity markets kept moving higher, while the US yield curve continued to flatten. The 2-10 and 10-30 differentials reached the lowest level since August 2007. President Trump’s decision to withdraw from the Iran’s nuclear deal pushed oil prices at the highest level since November 2014. This should further support headline inflation dynamics in the coming months.