Commodities | Emerging Markets | Equities | FX | Rates | Trade Idea | US
MH Model Portfolio: Adding to CORZ5 as BoC to Cut Further
- By Bilal Hafeez
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Portfolio Changes
We entered one new trade since the previous update, and closed one, with our portfolio up 0.7% since last week.
New Trades
Re-entering Long XAU
After a brief consolidation, gold looks to be trending higher. Speculative flows from Shanghai and Western ETFs have driven gold higher over the past two weeks.
Gold’s correlation with the US dollar has also strengthened, meaning a weaker dollar is increasingly important for the rally to continue. We re-enter 50% long gold at $3,370 (target $3,600, stop at $3,270).
Changes to Existing Trades
Adding to Long CORZ5
The recent employment data was better than feared, as the unemployment rate rose again, suggesting rising labour market slack. Deputy Governor Sharon Kozicki’s recent speech highlighted that many firms have paused capex and hiring due to uncertainty stemming from trade tensions. This means risk of further loosening in labour conditions remains high. We believe the BoC will conclude its rate-cutting cycle at 2.25%. We add to long CORZ5 (previously a 50% position) and widen the stop-loss to 97.45.
Exited Trades
Closed One Month XAU Put Spread
With the bullish XAU outlook outlined above, we close our 1m XAU put spread at $3 (initial cost: $17.7).
Historic Performance
Our portfolio rose 0.7% since last week and is now up 5.5% YTD. The portfolio has returned +66.2% since inception (+10.0% annualised), with a 0.8 Sharpe ratio. This continues to place it above the average discretionary macro hedge fund since inception, which has gained 49% (Bloomberg: BHDMAC Index; Chart 1).
Current Trades
DM
Rates
- Long SOFR Dec 25 (50% position) (entry: 96.130, target: 96.900, stop: 95.810) – read here.
- 10s30s JGB Flattener (50% position) (entry: 1.41%, target: 1.20%, stop: 1.5%) – read here.
- Long SONIA Dec 26 (entry: 96.320, target: 97.000, stop: 96.150) – read here.
- BTP-Bund Widener (entry: 102bps, target: 130bps, stop: 88bps) – read here.
- Euribor Z5/Z6 Steepener (entry: 0.175, target: 0.550, stop: 0.000) – read here.
- Pay 1y EUR Inflation Swap (entry: 1.39%, target: 1.90%, stop: 1.15%) – read here.
- Long 10y UK Linker (entry: 1.210%, target: 0.200%, stop: 1.700%) – read here.
- Long Corra Dec 25 (entry: 97.645, target: 98.000, stop: 97.500) – read here.
FX
- Short AUD/NZD (entry: 1.0793, target: 1.04, stop: 1.0950) – read here.
- Long EUR/GBP (entry: 0.853, target: 0.900, stop: 0.815) – read here.
- Short DXY (50% position) (entry: 99.80, target: 90.00, stop: 103.50) – read here.
- Long NOK/SEK (entry: 0.9415, target: 1.000, stop: 0.918) – read here.
EM
Rates
- Long 10Y CGB via onshore futures (TFTM5 at 107.315) (entry: 1.85%, target: 1.45%, stop: 1.75%) – read here.
FX
- Long USD/CNH Jun 25 7.3×7.4 call spread (entry: 13bp, target: 60bp) – read here.
- Short EUR/ZAR (entry: 20.670, target: 19.800, stop: 21.100) – read here.
- Long EUR/PLN (50% position) (entry: 4.270, target: 4.450, stop: 4.180) – read here.
Commodities
- Long XAU/USD (50% position) (entry: $3,370, target: $3,600, stop: $3,270) – read here.
To see a full list of our trades since inception to the end of 2023, please see here.
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