Posts tagged 'flows'

All aboard the US$ flow merry-go-round!

Money managers have been stung hard this year due to US government bonds not performing the way their traditional mean-reverting strategies suggested they would. Taper was supposed to imply sell-off. That didn’t happen. And now everyone is trying to understand why not.

At FT Alphaville we’ve presented the flow explanation on a number of occasions. The theory is that taper talk prompts dumb money to sell safety, and the smart money — which knows there’s no such thing as underpriced principal safety these days and that taper implies risk-off — to pile into safety at an even faster rate.

In this theory the whole process is then exacerbated by a feedback loop. Sellers of safety buy risky assets, like emerging market debt, instead. But the sellers/issuers of that debt then recycle that cash back into safe US dollar securities, rather than goods or services in the emerging market. So every risk-on signal from the Fed only ends up creating more buyers for dollar denominated bonds. Read more

Time to rebuild dollar longs?

Here’s a chart that caught our eye on Wednesday morning (click to enlarge):

It comes via George Saravelos at Deutsche Bank and shows the surge in short-term flows. Read more

European money market funds are hemorrhaging

Here’s an interesting chart from Société Générale compiled using data from EPFR Global.

It shows recent flows in and out of European money-market funds. Read more

Who’s been buying Japan like crazy?

Here’s an about-turn for the books:

 Read more

Sterilising Chinese inflows

Hot money is flowing into emerging markets, FT Alphaville says. But government attempts to sterilise the inflows with bond issues may be making the problem worse — especially in China. Read more