THE MAVERICK TREASURER - SEP 2016 THE MAVERICK TREASURER - SEP 2016 | Page 5

The Maverick Treasurer – September 2016 Edition
Global Economic Review by Editorial Desk
As predicted Year 2016 turning out to be more volatile than expected. Traders across the Globe
are reshuffling their Portfolios every second day as to mitigate the impact of rising implied vols
in their portfolios. Traders would enjoy this more as this would lead to big earnings in their books
which is in sync with the great say that Volatility rises so would be the earnings of Traders.
Traders are very much concerned about VAR (Value at Risk) of their portfolio and how they would
be able to take cross hedge against such VAR number as to remain profitable for longer tenors ??
The most important topic as per Editorial Desk is NIRP (Negative Interest Rate Policy). Sitting
today more than $ 20 Trillion of Sovereign National is having NIRP. In that sense investors are
not earning rather than paying to the Sovereign. This month we had two big sessions of Central
Banks like Bank of Japan (BOJ) and Federal Reserve (FED) where by former is still saying that he
would continue with Negative Interest Rate of 10 Bps while Fed has not given any guidance of
hike in the Interest Rates.
Editorial Desk would also agree with the thoughts that if Fed would hike rates then Indian
Rupee would move towards Reverse Carry. In that sense INR may head towards sharp
depreciation as there are many currencies across the Globe who are offering highest carry like
Australian Dollar, Singapore Dollar, and Indonesian Rupiah as an Investment Carry.
The most important point is the statement by Japanese Central Bank Kuroda that Japan is having
more room for QE which makes things worse for Fixed Income Markets. Sep 2016 edition would
also cover as De facto, the real action is likely to be coming out of Tokyo, where speculation is rife
for a possible rate cut (deeper into negative territory), an extension of the ongoing asset purchase
program and above all, a possible tapering in overall purchases of long-dated bonds (JGBs) to
encourage steepening of the yield curve in Japan matched by lower yields at the shortened.
There were no surprises from the US Fed as it held rates steady in its policy meeting and appeared
to prep the markets for a rate hike in its December policy. Fed chair Janet Yellen’s comment at a
post-policy press –conference succinctly captured her stance. ‘"We judged that the case for an
increase has strengthened but decided for the time being to wait. The economy has a little more
room to run."
Advice from Editorial Desk: - Traders are advised to keep an absolute look at the volatility levels
in their Portfolio. Sitting today crosses are turning more volatile than straight Direct and Indirect
Pairs in the Foreign Exchange Markets. Central Banks left with either little or no fire power to
douse the fire of Global Recession which is round the corner so be careful mates!!
All the Best,
Rahul Magan
Chief Executive Officer, Treasury Consulting LLP
Founder & Chief Editor, “The Maverick Treasurer”
91-9899242978, Skype ~ Rahul5327, Twitter @Rahulmagan8
www.treasuryconsulting.in

Treasury Consulting LLP

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