Highlights

SGH reports are highly valued for keeping clients and policymakers informed and well-ahead of consensus and the news cycle on the macro policy events driving global markets.

2015
December 10, 2015
SGH Insight
"Meanwhile, in the near term, economic officials believe expectations of a Fed rate hike on December 16 will keep upward pressure on the dollar, and so the PBoC will remain judicious, on and off, in its interventions in order to avoid blowing through even more valuable FX reserves in fighting those pressures than it already has. Once the Fed and CEWC meetings are out of the way by December 20, however, the PBoC may resume more aggressive action to manage the currency back closer to what it originally had in mind as a target for year-end of around 6.4000."
Market Validation
(Bloomberg 12/16/15) -- "The yuan rebounded from early losses in Hong Kong’s offshore market, spurring speculation Chinese policy makers are propping up the currency after its discount to the onshore spot rate doubled. The yuan was trading 0.05 percent stronger at 6.5280 a dollar as of 4:33 p.m. in Hong Kong, after sliding as much as 0.19 percent, according to data compiled by Bloomberg. It erased the drop within 15 minutes of reaching the day’s low. In Shanghai’s onshore market, the yuan fell for a ninth day, the longest run of losses since at least 2007, to close at a four-year low of 6.4733. A major Chinese bank placed a "sizable bid" for yuan at around 6.53, triggering the rebound in the offshore rate."
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November 13, 2015
SGH Insight
"Another negative reading, we are told, will galvanize the government of Prime Minister Shinzo Abe to formally propose an approximately 3 trillion yen supplementary budget, which will be discussed in the Diet session in early January 2016, as well as an acceleration of the previously proposed corporate tax cuts (see SGH 10/26/15, “Japan: Scraping for More Stimulus”). These should be rolled out next week."
Market Validation
(Bloomberg 11/17/15) "Yen drops for second day against dollar; Japanese PM Abe may order extra budget to support economy: Economy Minister Amari; says biggest help would be for companies to use their cash reserves to boost wages and investment; Cabinet Secretary Suga says scale of extra budget not decided"
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October 28, 2015
SGH Insight
"We believe this October statement points to an FOMC majority, which includes Chair Janet Yellen, that is sticking to its stance the US economy is essentially “there” in warranting the start to a very gradual normalization of the policy rate. Prohibitive risks are being monitored but are not precluding a rate move, and while an FOMC first rate hike “at its next meeting” is not a foregone conclusion, we think the October statement indicates the burden of proof has sharply swung back against those Committee members arguing against a December rate move."
Market Validation
(Bloomberg 11/4/15) " -Treasury Two-Year Yields Set Four-Year High as Bets on Fed Climb - Probability of Fed rate increase next month climbs to 58%
- Yellen says December meeting is `live' if data support move
- Treasuries fell, pushing two-year yields to the highest since 2011, as Federal Reserve Chair Janet Yellen said she sees the economy as performing well, stoking speculation the central bank will raise its benchmark interest rate next month.

In testimony to U.S. lawmakers in Washington on Wednesday, Yellen said a December rate move would be a "live possibility" as long as data support an increase. Fed officials last month raised the prospect that the Fed’s first increase since 2006 would come in December."
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October 26, 2015
SGH Insight
"While the Bank of Japan is indeed certain to lower its growth and inflation projections at this week’s Monetary Policy Committee meeting, the downward revisions will not be accompanied this year as they were last year by a surprise Halloween easing, namely there will be no expansion in the BOJ’s 80 trillion yen monetary base growth target...

...The good news is that Abe has started to turn his focus back to stimulus measures other than monetary policy. In addition to the possibility of a modest two or three trillion yen supplemental budget stimulus, Administration leaks suggest those, more interestingly, may also include a plan to accelerate the speed of promised cuts in the corporate tax rate."
Market Validation
(Bloomberg 10/30/15) "The yen rose, cementing its status as this week’s best-performing Group-of-10 currency, after the Bank of Japan refrained from adding to monetary stimulus and pushed back the time-frame for reaching its inflation target. The yen advanced 0.6 percent to 120.36 per dollar as of 7:20 a.m. New York time, on track for a 0.9 percent gain this week, its biggest since early September...

Japanese stocks rose, with the Topix index
capping its best monthly gain in more than two years, as
investors looked past a Bank of Japan decision to refrain from
adding to monetary easing and focused on earnings and a report
that the government is considering extra fiscal stimulus."
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October 26, 2015
SGH Insight
"We do believe an FOMC majority still expects conditions to warrant a start to policy normalization at the upcoming December meeting. To that end, we expect the FOMC in Wednesday’s statement to affirm continued “moderate” growth, perhaps cite “cumulative” gains in the labor market to offset the slower net new job growth, and, we suspect, soften somewhat the sentence on the international risks to the US outlook."
Market Validation
(Bloomberg 10/28/15) "Treasuries fell as Federal Reserve policy makers said the economy is still expanding at a “moderate” pace as they left interest rates unchanged, giving themselves the option to tighten policy at their next meeting in December.

Two-year note yields reached a one-month high. The Fed also removed a line from September’s statement saying that global economic and financial developments “may restrain economic activity somewhat,” saying Wednesday only that the central bank is monitoring the international situation.

U.S. 2-year note yields rose nine basis points, or 0.09 percentage point, to 0.72 percent as of 2:11 p.m. in New York, according to Bloomberg Bond Trader data."
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October 13, 2015
SGH Insight
"Along with a CPI that is expected to drop from the last 2% reading, a sub-7% GDP will also we believe trigger a cut by the People’s Bank of China in both the RRR (reserve requirement ratio) of 50 basis points, and a cut in interest rates of 25 basis points in the second half of October."
Market Validation
(FT 10/23/15) "European equities are enjoying another buoyant day on the back of today's rate cut from the People's Bank of China and yesterday's European Central Bank meeting, which paved the way for further monetary stimulus as early as December.

The PBoC just cut its reserve requirement ratio by 0.5 percentage points, and the one-year deposit and lending rates by 0.25 percentage points, writes Joel Lewin.

Germany's Dax leapt another 1.2 per cent on the news, and is now up 3.2 per cent on the day. The index has risen 14.6 per cent since it hit an eight-month low at the end of September.

The FTSE 100 climbed another 0.6 per cent after China's rate cut was announced and is now up 1.7 per cent today.

The French CAC 40 also jumped another 1 per cent and is now up 2.9 per cent on the day, having risen for six out of the last sessions."
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September 29, 2015
SGH Insight
"But putting aside initial relief in having averted the potential high risk disaster of a greater than 50 percentage point vote for the pro-independence parties – a result which was frankly never reflected in the polls to begin with – we believe the “as expected” performance of the pro-independence parties in the weekend vote is still likely to generate more, not less, instability and polarization between Madrid and Barcelona, making negotiations on further autonomy and concessions from Madrid that much harder than previously thought."
Market Validation
(Bloomberg 11/9/15) "Spanish bonds slid for a fourth day, set for the longest losing streak in eight weeks, as Catalonia’s parliament passed a motion declaring the start of independence, a move that the Spanish Prime Minister Mariano Rajoy will block via a lawsuit before the Constitutional Court."
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September 18, 2015
SGH Insight
“The Fed intends to undertake a major communications offensive in the coming weeks. Fed officials are likely to lay out a fairly coordinated case that a cautionary, tactical delay from a close call September first rate hike was warranted with the start to policy normalization still likely before year-end. They are likely to affirm their confidence in the economy’s underlying momentum that should drive enough job growth to slowly lift inflation as the “transitory” international downward pressures fade from the data.”
Market Validation
(Bloomberg 9/21/15) "Treasuries Fall Amid Risk-Asset Gains, Hawkish Fed Comments
10Y yield was 8.2bps higher in late trading, erasing Friday’s decline to lowest closing levels since Sept. 7
2Y yield, whose 13.1bp drop Thursday from YTD high 0.811% to 0.679% was biggest since March 2009, was 3.3bps higher at 0.710% in late trading"

Dennis Lockhart, a FOMC voter, said he’s confident rate liftoff will occur this year as markets settle down, echoing comments over weekend by John Williams, James Bullard and Jeffrey Lacker.


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September 08, 2015
SGH Insight
"Premier Li Keqiang recently chaired three high level meetings - special meetings of the State Council and the State Council's Executive Body - to reassure jittery local officials and outline policy measures that are being prepared to ensure Beijing meets its economic targets, and in the process stabilizes markets."
Market Validation
(FT 9/9/15) "There has been some remarkable action in Asia. Australia’s S&P/ASX 200 rose 2.1 per cent, South Korea’s Kospi added 3 per cent and Hong Kong’s Hang Seng is bouncing 3.8 per cent as the region followed the lead from Wall Street’s overnight rally.But these moves pale against the 7.7 per cent advance for Tokyo’s Nikkei 225, its biggest gain since October 2008.China, Late on Tuesday evening, following grim trade data, China’s Ministry of Finance posted an article on its website stating it would carry out “stronger proactive fiscal policy” to counter headwinds to economic growth.Worries about slowing Chinese business activity have been an important cause of recent market volatility, so the prospect of Beijing doing more to support the world’s second-biggest economy is calming nerves. The Shanghai Composite rose 2.3 per cent."
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August 24, 2015
SGH Insight
"SGH China: Plunging Markets, RRR Cuts and the RMB We believe an RRR cut is indeed very much still on the table, despite the decision not to cut last night, and furthermore is possible even if markets (and the currency) show some tentative signs of stabilization given all the damage that has already occurred. It is worth remembering the leadership also continues to target and expect China's growth numbers to stabilize and pick up above the H1 levels in the third quarter."
Market Validation
(Bloomberg 8/25/15) "European stocks jump to session high, erasing most of Monday’s losses, credit spreads tighten and bund futures tumble to session lows after China cuts interest rates, reserve requirement ratios.
USD/JPY rises to 119.98 Stoxx 600 rises 14.79 to 356.80; fell 19.27 yday Sept. bund future falls as much as 141 ticks to 154.27 German 10Y yield +10bps to 0.69%, US 10Y yield +8bps to 2.08% iTraxx Main index -4bps to 74, iTraxx Crossover index -20bps to 345 WTI futures +$1.38 to $39.68/bbl"
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August 24, 2015
SGH Insight
"President Xi has made it a top priority for the central government to ensure the success of the September 3 parade at Tiananmen Square. Although Xi and the CFLG have no specific plan of their own to keep the RMB exchange rate and stock market relatively stable, it is almost certain Premier Li and the state council will be pressed to take forceful measures to prevent a continued stock market crash through the celebration."
Market Validation
(Bloomberg 8/27/15) -- "China’s government intervened in the stock market on Thursday to end a $5 trillion rout, according to people familiar with the matter. China wants to stabilize equities before a Sept. 3 military parade celebrating the 70th anniversary of the victory over Japan during World War II, said the people. The Shanghai Composite Index swung from a loss of 0.7 percent to rally 5.3 percent in the last hour of trading, ending its steepest five-day rout since 1996."
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August 12, 2015
SGH Insight
"We expect the currency depreciation to be managed closely, and take Beijing at its word that it will probably not lead to a drastic devaluation when the dust settles. We believe the volatility and sharp sell-off in the RMB will most likely dissipate after at most an around 5-7% move - of which we have seen almost 4% already. If the markets do not settle by themselves, the PBoC is authorized and will intervene on the close to "adjust" that market driven rate to more reasonable levels."
Market Validation
(Bloomberg 8/13/15) "The yuan’s tumble eased as China’s central bank signaled support for the currency, calming investors after a shock devaluation on Tuesday rattled global markets.The PBOC said in a rare press conference that there’s no basis for depreciation to persist and policy makers will step in to control large fluctuations."

(Bloomberg 8/13/15) "Panic subsided in global markets as China’s central bank eased concern that the yuan was headed for a disorderly devaluation.
Shares in emerging markets rebounded from the lowest level since 2011 and European stocks halted the biggest two-day slide this year. Bonds and gold slipped as demand for haven assets dropped while the dollar strengthened amid increased bets the Federal Reserve will raise interest rates as soon as next month. Though China’s currency weakened for a third day, the pace of declines slowed."
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July 10, 2015
SGH Insight
"Federal Reserve Chair Janet Yellen will be speaking on the US economy starting at 12:30 today in an address before the City Club of Cleveland. We suspect that, on balance, her remarks on the domestic economy may surprise to the upside, taken by a dovish-leaning market keenly focused on global risks as mildly more hawkish than what might be expected."
Market Validation
(WSJ 7/10/15) "Shorter-dated U.S. government bonds extended their price losses Friday after Federal Reserve Chairwoman Janet Yellen signaled the central bank is on track to raise short-term interest rates later this year.
The yield on the two-year Treasury note climbed to 0.649%, compared with 0.621% before Ms. Yellen spoke and 0.585% on Thursday, according to Tradeweb. Yields rise as prices fall.
The yield on the benchmark 10-year Treasury note was 2.403% compared with 2.377% right before the Fed chairwoman’s speech and 2.301% Thursday."
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July 09, 2015
SGH Insight
"On first blush, Athens looks to have moved enough to make it awkward for the EU to say no, though not enough to make it an easy or certain yes. But while the Eurogroup might come still back to ask for a little more in the closing hours, on balance, we are cautiously optimistic a deal is indeed in the making by the end of the weekend that will enable the European Central Bank to maintain its lifeline to the Greek banks and to keep Greece in the Eurozone."
Market Validation
(Bloomberg 7/10/15) "Global markets signaled growing faith in Greece’s ability to clinch a bailout, as U.S. and European stocks climbed and the euro jumped the most in more than two years against the yen.
The Standard & Poor’s 500 Index climbed 1.2 percent at 12:37 p.m. and the Stoxx Europe 600 Index capped its biggest two-day gain since 2011."
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June 10, 2015
SGH Insight
"EU officials, we believe, are now considering various options for extending the program for a short period of time beyond the June 30 deadline, perhaps even through the summer, in order to allow more time for negotiations."

"They also for the first time last week offered Greece a significant carrot in hinting (albeit not formally committing) they may grant Greece access to 10.9 billion Euros of funds already allocated and disbursed by the EFSF to the HFSF (Hellenic Financial Stability Fund), (see SGH 06/03/15, “Greece: Rocky Roadmap to a Deal”)."
Market Validation
(Bloomberg 6/26/15) "In a week where hopes of a deal on Greek finances have been raised and dashed repeatedly, Spanish and Italian bondholders have kept faith that an agreement will be reached.
As negotiations between Greece and its creditors continued, Spain’s 10-year securities headed for their biggest weekly gain in four months, and benchmark German bunds extended declines. Spanish bonds erased an earlier drop Friday as a European Union official said Greece’s creditors had proposed a five-month extension to the country’s aid program, and 15.5 billion euros ($17.4 billion) of disbursements, in negotiations to unlock funds."
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May 21, 2015
SGH Insight
"Greece is still far from delivering enough to unlock funding from the last tranche of the existing program."
Market Validation
(Bloomberg 5/26/15) "German government bonds rose the most in a week as investors sought safer assets amid concern that the rise of anti-austerity parties in the euro area would deepen political turmoil across the region. In Greece, the epicenter of Europe’s sovereign-debt crisis, sliding bond prices pushed two-year note yields above 25 percent."
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May 19, 2015
SGH Insight
"The Greek proposals are unlikely to be sufficient to move the needle in the European capitals. Instead, clearer evidence of credible “redline” concessions and ratification by the Greek parliament is where the creditor demands are now leaning."
Market Validation
(Bloomberg 5/26/15) "Treasury 30-year bonds rose the most in more than a week as investors sought a refuge amid plunging stocks and as talks between Greece and its creditors foundered."
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May 08, 2015
SGH Insight
"The tenor of negotiations has certainly improved over the last week and there will probably be sufficient movement by Monday for the Eurogroup to strike a cautiously positive note , however it is highly unlikely Greece and its EU partners will be able to show sufficient progress to confidently point to an imminent release of funds."
Market Validation
(FT 5/11/15) "Greek stocks recovered from their lows of the day but remained sharply lower, as eurozone finance ministers once again try to reach a deal that would hand cash to the government in Athens this month.

Ministers are meeting in Brussels with the government of Greek prime minster Alexis Tsipras needing to make a payment of €750m to the International Monetary Fund on Tuesday.

Greek stocks were down 2.6 per cent at 817.05 in late afternoon trading, while yields on its three-year bond were up 15 basis points at 20.1 per cent."
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April 28, 2015
SGH Insight
"Our understanding from Athens is that Tsipras, after the current round of private negotiations with Brussels, including a call that is hoped will happen on the technical level with the Euro Working Group tomorrow, will seek to prepare an Omnibus Bill to present to Parliament - literally within the next few days. "
Market Validation
(Bloomberg 4/28/15) "Greece’s government bonds rose, pushing prices on two-year notes to the highest in more than a month, as the country resumed efforts to break a deadlock with creditors amid evidence that voters want the government to compromise. The gains pushed down yields on the notes due in 2017 toward the lowest in a month."

(Bloomberg 4/29/15) "'Brussels Group' of Greek finance ministry officials, representatives of creditor institutions will convene Thursday morning to discuss progress of Greek bailout talks."
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April 21, 2015
SGH Insight
"From what we understand, despite the negative headlines, there has been some limited progress in negotiations at the technical level between Greek officials and the "Brussels Group" Specifically both sides have moved closer on the thorny issue of privatizations, and on a political level Greek sources maintain that both sides are settling on a compromise primary budget target of somewhere between 1.2-1.5% of GDP."
Market Validation
(Bloomberg 4/22/15) "Spanish and Italian bonds rose, reducing the yield premium over their German counterparts, after Greece’s Finance Minister Yanis Varoufakis fueled optimism that the nation and its creditors are narrowing their differences. Spain’s 10-year yield dropped by the most this month. Greek bonds rose, pushing the three- and 10-year yields down from the highest levels since 2012."

(Bloomberg 4/23/15) "The euro strengthened the most in one week against the dollar on speculation that Greece and its creditors will reach a deal to receive aid payments before the country runs out of money."
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