RBF UCITS Monthly - March 2018

  • The Fund’s ID USD class was up 1.07%; up 1.65% ytd
  • Concerns over trade war shakes asset markets
  • UST curve flattens due to material supply at short-end
  • Offshore renminbi (CNH) gains ~1% against dollar in March; up 4% ytd
  • New Chair Powell says Fed will remain flexible and gradual in normalising

A rollercoaster March ended what was a very uneasy quarter across asset classes. Markets appeared the least bit concerned about the Fed’s well publicised and priced-in 25bps hike, to 1.50%-1.75%, with focus shifting to what newswires referred to as the beginnings of a trade war. Mr Trump’s introduction of “flexible” 25% steel and 10% aluminium tariffs, followed by attacks on China’s alleged IP infringement and announcement of USD 50bn worth of tariffs on Chinese imports appeared to shake markets. This coupled with the negative performance across the US tech sector saw equity markets tumble over the month with the S&P Index closing in negative territory year-to-date. Meanwhile, the yield on the 10-year UST fell 12bps to 2.74%, having traded as high as 2.92% intra-month. Incidentally the UST curve flattened, the spread between the 2- and 10-years fell to fresh 10-year lows; with the bulk of UST issuance at the shorter-end of the curve, we may see further flattening. The dollar could not hold on to its strong start; the DXY Index tumbled 0.71%, falling below the 90 level, which supported the CNH ~1% appreciation. Brent crude traded 6.83% higher in March, closing above $70pb following the appointment of John Bolton as US national security advisor; sanction tensions with Iran could be resurrected.

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