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
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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April 16, 2015
SGH Insight
"The next negotiating inflection point is the Eurogroup meeting in Riga on April 24, but any real decisions will now look to have to wait until May 11 in Brussels. If between now and then there looks to be an "imminent" accident looming, a rushed intervention at the heads of state level with a "daily escalation" plan is likely."
Market Validation
(Bloomberg 4/18/15) "Greece’s government bonds had their worst week since the aftermath of Syriza’s January election victory as the nation failed to make tangible headway in its efforts to secure funding and avoid a default.
The yield on 10-year Greek debt climbed to the highest since December 2012 as the clock ticked down toward almost 1 billion euros ($1.1 billion) of payments due next month."
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April 14, 2015
SGH Insight
"That means the BOJ will be frozen on monetary policy, and continue to let the economy ride as is, certainly without offering any additional near term monetary easing."

SGH Fed: Here Again April 27, 2015

"The Committee will acknowledge the slower first quarter growth, but within the same breath that it is likely to prove transitory. That translates into expectations of unemployment falling steadily through the year and low inflation persisting but still picking up next year "
Market Validation
(WSJ 4/15/15) "Bank of Japan Governor Haruhiko Kuroda said that the country’s underlying inflation trend is steadily improving, that inflation expectations are rising and that corporate wage- and price-setting behavior is changing."

(Bloomberg 4/15/15) "Yen drops 0.2% to 119.58 per dollar, set to snap three days of gains"

(Bloomberg 4/30/15) "Asian stocks dropped the most since January after the Bank of Japan refrained from boosting stimulus and as the Federal Reserve downplayed weak U.S. economic growth and kept raising interest rates on the table for later this year."
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April 02, 2015
SGH Insight
“We firmly believe that despite the threats and warnings, Greece will indeed meet its April 9 payment to the IMF”
Market Validation
(Reuters 04/09/15) "World stocks marched higher on Thursday, lifted by Greece's confirming it will pay a 450 million-euro loan tranche to the International Monetary Fund."

(FT 04/09/15) "Greece repaid €450m it owed the International Monetary Fund on Thursday, sending bond yields sliding as investors’ showed relief it had met its deadline. Yields on the country’s shortest dated notes declined, with three-year bonds declining 54 basis points to 20.08 per cent and five-year bonds falling 30 bps to 14.98 per cent."
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March 31, 2015
SGH Insight
" While a “Framework Understanding” announcement may be weaker than the signed “Framework Agreement” that was hoped for today, where it matters for markets, it may end up being far more significant than is being widely assumed."
Market Validation
(National Post 04/02/15) "Crude oil futures extended losses after Iran and world powers said they reached an outline accord that keeps them on track to end a decade-long nuclear dispute. Brent slid as much as 5.4% in London, while West Texas Intermediate crude dropped 4% in New York."
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March 25, 2015
SGH Insight
"We believe there is a reasonable likelihood Greece’s payment to the IMF may be missed and delayed by a week or two as Athens scrambles to put together a budget acceptable to its creditors."
Market Validation
(Bloomberg 04/01/15) "June bund future climbs as much as 45 ticks to 159.21, contract peak, after Spiegel reports that Greece doesn’t want to respect IMF April 9 repayment deadline."
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March 13, 2015
SGH Insight
"If, defying the skeptics, there is a substantive agreement on a framework by the end of March, as we expect, the next deadline will be July 1 for a comprehensive agreement."
Market Validation
(FT 03/24/15) "The prospect of a wave of Iranian crude exports has already hit internationally traded Brent: after rebounding to $60 a barrel last month, it now hovers around $55 a barrel amid expectations of a deal by March 31."
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February 19, 2015
SGH Insight
"We would venture a guess of perhaps as high as 50% odds that the parties don’t have enough time to finalize anything over the next 24 hours beyond a partial communique or agreement to keep negotiations going."
Market Validation
(FT 02/20/15) “The deal, reached at a make-or-break meeting of eurozone finance ministers on Friday night, leaves several important issues undecided. The new Greek government is to submit those measures for review to the International Monetary Fund and EU institutions on Monday, and officials said if they were not adequate another eurogroup meeting could be called on Tuesday."
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February 18, 2015
SGH Insight
"June, in other words, is when the FOMC is more likely to make its decision on the lift-off timing rather than when it actually pulls the trigger on that long-awaited first rate hike. Indeed, we still see a more prudent building of consensus in the Committee from June into September as the most likely meeting for a rates lift-off"
Market Validation
(Bloomberg 02/18/15) "May/Aug 2015 fed fund futures spread at 13.5bps, implies 54% probability of a 25bp rate hike at June or July FOMC meetings after Jan. 27-28 minutes showed many officials inclined to stay at zero longer."
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February 10, 2015
SGH Insight
"And from the few signals we pick up from Moscow, we believe a cease fire agreement can indeed be reached."
Market Validation
(RT 02/12/15) "The MICEX index hit 1,805 points, its highest level since April 2011. The ruble, which has lost more than 50 percent against the dollar in the last year, improved 3.6 percent to 64.65 per 1 USD. Before the talks, it dropped nearly 3 percent against the dollar on the worry a deal wouldn’t be struck."
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January 15, 2015
SGH Insight
"Furthermore we believe there is a good chance the ECB may in the end deliver more than the 500 Billion Euro purchase program reported by the press to have been discussed at last week’s interim meeting as the 'maximum' option."
Market Validation
(ECB Introductory remarks 01/22/15) "Under this expanded programme, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term."
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2014
November 11, 2014
SGH Insight
"As recently as yesterday there was overwhelming consensus in the media, markets, and analyst community that Prime Minister Shinzo Abe would press ahead and announce as planned the second installment of sales tax hikes around December 8, after the release of the final reading of Japan’s third quarter GDP. We had been warning for some time, however, that despite those expectations the political landscape was shifting and that it was in fact probable Abe would delay the second tax hike, even with the major monetary stimulus assist provided to the economy by Bank of Japan Governor Haruhiko Kuroda at the October 31 Monetary Policy Committee meeting."
Market Validation
(CNBC 11/18/14) "Japanese Prime Minister Shinzo Abe called a snap election on Tuesday, and announced a delay in the second sales tax hike by 18 months after the country fell into recession."
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September 03, 2014
SGH Insight
"We suspect there is at least a reasonable chance the ECB could add a small rate cut tomorrow to the much anticipated roll out of its ABS program. While of limited effectiveness as a stand-alone measure, and thus not widely expected, a small rate cut alongside other measures could help generate greater interest in the upcoming TLTRO as well as keep pressure on the Euro in further reinforcing the Eurozone rate differential story."
Market Validation
(WSJ 09/4/14) "In an effort to keep too-low inflation from derailing the eurozone's weak economy, the European Central Bank surprised financial markets with a cut in interest rates and new stimulus plans, despite opposition from Germany's powerful central bank."
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