NFA Global UCITS Monthly - March 2018

  • The Fund’s QDUSD class returned 0.09%
  • Tariffs concerns cause some market jitters; long-end UST curve a safe haven
  • As expected Fed raises rates by 25 basis points and UST curve flattens

In March the White House’s more aggressive trade agenda and the risk of a more hard-line foreign policy, as a number of Whitehouse staff were replaced, added to uncertainty and created some jitters across asset markets. Notably, the appointment of Mike Pompeo as Secretary of State and John Bolton as the National Security Adviser was unsettling in terms of policy direction. Brent crude traded higher over the month closing above USD70pb helped by concerns sanction tensions with Iran could be resurrected. President Trump also enacted tariffs on the steel and aluminium sector and then followed up with plans for tariffs targeting another USD50bn worth of Chinese exports.

Later in the month, and as expected, the Fed raised the target range for the Federal Funds rate by 25 basis points to 1.5-1.75%. The updated Fed ‘dot plot’ median projection continued to look for 3 hikes this year, although it forecast a more hawkish outlook for 2019-2020.  Jerome Powell noted ‘there’s no sense in the data that we’re on the cusp of an acceleration in inflation’ and importantly inflation and wage data was benign. The yield on 10 year UST fell 12 basis points to yield 2.74% at month end and the yield curve flattened: Fed tightening and a significant amount of UST issuance targeting the shorter-end of the curve pressured yields there and the 2y10y spread reached another low since 2007 at just under 47 basis points. Over the month the US dollar remained on the back-foot with the DXY index falling 0.71%.  

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