Multi-Asset Weekly Newsletter

Global Developments & Global Equities 

DOMESTIC ASSETS RESILIENT DESPITE ESCALATION IN BORDER TENSIONS; MIGHT RALLY ON FIRST SIGNS OF LASTING CALMNESS

In a latest development on trade, US President Trump said great progress has been made on trade talks between the US and China. A total reset has been negotiated in a friendly and constructive manner, he added. The Trump administration decided not to go ahead with AI chip restrictions imposed by the Biden administration that were due to come into effect from May 15th. The US Fed left Rates unchanged and highlighted the increasing possibility of a stagflationary situation US April CPI will be the key data to look forward to in the coming week. The market is pricing in 2.6 cuts by the Fed until the end of 2025, compared to 3.2 cuts last week. 

NIFTY V/S GLOBAL MARKETS

US equities took a bit of a breather this week while European and APAC equities did well.

FIXED INCOME:

Yield on the US 2y edged up 6bps to 3.89%, and that on the 10y rose 3bps to 4.38%. 10y Yields across the Eurozone and UK were up 3- 5bps. Yield on the old 10y benchmark traded a 6.31- 6.44% range this week and eventually ended at 6.38, 4bps higher than last week's close. 1y OIS was almost unchanged at 5.64% for the week, while 5y OIS rose 6bps to 5.66%. 10y AAA PSU spreads are at 50bps, and 10y AAA NBFC spreads are at 78bps RBI announced relaxations in limits for FPIs to invest in corporate bonds this week. 

FOREIGN EXCHANGE:

G10 currencies gave up some gains against the Dollar in the week gone by. BoE cut Rates by 25 bps. 5 MPC members voted for a 25 bps cut, 2 for a 50 bps cut, and 2 for keeping rates unchanged. Below is how G10 currencies performed this week: NOK (+0.5%) and GBP (+0.3%) were the best performers, while NZD (-0.6%) and CAD (-0.9%). They were the worst performers. Asian currencies were a mixed bag against the Dollar this week. TWD (+1.7%) was the best performer, while INR (-1%) and MYR (-1%) were the worst performers Rupee came under pressure after Indian armed forces launched Operation Sindoor to avenge the Pahalgam terror attack. However, the RBI was likely present to prevent a runaway move. Intraday moves have been quite violent. On Friday Rupee had weakened to 85.86 but ended the session at 85.38. 3m ATMF implied volatility surged 65bps this week to 6.22%, the highest since Oct'22. 1y and 5y implied forward yields are at 2.28% and 2.88% respectively.  

COMMODITIES:

Brent saw a technical bounce back this week and ended 4.3% higher at USD 63.9 per barrel. Precious metals gained, with Gold ending 2.6% higher at USD 3324 and Silver 2.2% higher at USD 32.7 per troy ounce. Gold hit an all-time high of USD 3435 intraweek 3M LME Aluminum ended flat this week at USD 2417, and Copper advanced 2.6% to USD 9445. Dalian Iron ore ended 0.6% lower.