This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Responses were collected on 17 November 2023.
Macro Hive Network
The biggest shift this week among our participants’ trades has been on the rates side.
Participant 7 decided to close their puts in TLT, as it looks like the Fed is now done. Meanwhile, Participant 15 is looking to receive UK 10Y rates. They see the UK economy remaining under pressure, which means further hikes from the BoE. Should they occur, it will be at the expense of the economy.
On the BoE, Henry also likes receiving rates. In particular, he’s looking to receive May 24 SONIA, as this gives enough time for the data to deteriorate enough for the market to start pricing in the first rate cut. Elsewhere, in EM, Caroline likes receiving 5Y ZAR swaps. She sees tighter fiscal policy allowing the SARB to shift to a more dovish stance.
The other trend we see is a shift towards precious metals. Again, both Participants 7 and 15 turn long precious metals here. Participant 15 likes being long gold, as it should do well if the Fed is at the end of its hiking cycle. While Participant 15 has expressed this via silver – they see continued central bank purchases coupled with their safe haven status benefiting precious metals.
Viresh has a slightly different view. He still owns 6m $1,850 gold puts. While much of the upside this week has come from lower rates and lower USD, he thinks this could reverse in the coming weeks as continued strong data in the US prevents the Fed from cutting as the market expects. This will ensure money market funds (i.e., cash) continue to be a better alternative to gold.
Bilal’s Trades and Views
We made six changes to our portfolio since last week, including exiting two positions.
We exited long USD vs. the European basket after the broad selloff we saw following last week’s CPI. The trade flipped from a winning position to a loss, ending down 1.2%.
We also closed EUR/GBP, taking profit up 0.2%. We still like GBP downside but are wary of further USD downside, which is likely to benefit GBP over EUR (without a GBP repricing).
DM
Rates
- Receive May 2024 SONIA (target 25 bps cuts) – read here.
- Long 10Y Gilt (FX hedged) vs short 10Y OAT (target -100 bps; stop -25 bps) – read here.
- Pay Apr-24 EUR-OIS (target 0 bps) – read here.
- SONIA and SOFR Mar24/Mar25 calendar box (target 0 bps) – read here.
- 5s10s UST steepener (target 15bps) – read here.
- Pay 1Y1Y US OIS (target 5%) – read here.
- Short US10Y vs USD hedged 10Y JGBs (target -450bps) – read here.
Equities
- Long homebuilders and regional banks – read here.
EM
FX
- Long EUR/CZK (target 25:60; stop: 24:00) – read here.
Rates
- Receive 5Y ZAR swap (target 7.50%; stop 8.75%) – read here.
Commodities
