RBF UCITS Monthly - January 2018

  • The Fund’s ID USD class was up 2.75% in January
  • Renminbi rallied 3.41% against dollar
  • Russian quasi-sovereign positions remained resilient; no further US sanctions
  • New Fed Chair Powell expected to follow in Yellen’s gradual hike footsteps

Markets appeared to have woken up from their holiday slumber in an erratic mood last month as all manner of indiscriminate asset class moves were witnessed. There were a number of factors which lead to the sell-off in USTs including: concerns of increased sovereign supply, knee-jerk reactions to the BOJ ‘stealth-taper’ and ECB’s more hawkish outlook (although the message still seems somewhat mixed). The yield on the 10-year benchmark rose 30bps, to 2.71%. Meanwhile, the dollar suffered another relentless fall, which helped the offshore renminbi’s 3.41% spot appreciation against the greenback; to its strongest level since the devaluation in August 2015. Brent also enjoyed a bounce last month, gaining 3.26%. Elsewhere, equity markets witnessed a defensive tone towards the end of the month, with all three major US indices tumbling off all-time highs and the VIX (volatility) Index witnessed a spike higher.

China data also surprised to the upside, with growth for 2017 released at 6.9%; the first year of acceleration in growth since 2010. With growth outperforming and SOE debt-to-asset ratios falling, policymakers can push forth with their deleveraging and de-risking drive, and supply-side reform. Elsewhere, the FOMC meeting was pretty uneventful, as expected, although erring on the hawkish side, following a pick-up in inflation; although it was noted that inflation remains soft and is expected to pick up in the medium-term.

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