07 March 2024 Equities | FX | Rates

Momentum Models Turn Bearish JGBs Following BoJ Talk

By Ben Ford

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Summary

Momentum models declined -0.3% over the past week. Poor rates (-1.0% WoW) and FX (-0.2% WoW) outweighed a positive equity (+0.7% WoW) outing.
Equity momentum models remain the best-performing model over a three-month timeframe (+6.9%).

Market Implications

Momentum models are bearish EUR/USD and bullish GBP/USD – we have closed our long USD trades.
They are also heavily bearish USTs – we took profit on our short US duration trades.

Latest Signals

Equity momentum models flipped bullish on the FTSE-100 and remain heavily bullish on the S&P 500, Nikkei, and DAX (Chart 1). John remains marketweight in equities, favouring companies that provide AI infrastructure with any selloffs in NVDA representing attractive buy opportunities.

Rates momentum models have flipped bearish on JGBs as BoJ speakers still signal that Japan’s economy is progressing towards the stable 2% inflation target, forcing more hawkish pricing from the market. They also pared US long bond bearishness. We have taken profit on our short US duration trades and our EUR April-ECB dated payer while our rates PCA model is flagging 12 trades, with a hit rate above 70%.

Turning to FX, momentum models have flipped bearish EUR/USD and heavily bullish GBP/USD – we have closed our long USD trades – but remain bullish on EUR/CHF – we have tightened our long EUR/CHF stoploss. Elsewhere, they turned bearish EUR/SEK, EUR/NOK, AUD/USD, and NZD/USD – we think markets have overstated AUD pessimism.

Model Performance

Momentum models declined -0.3% over the past week as poor outings for rates (-1.0% WoW) and FX (-0.2% WoW) outweighed a positive showing in equities (+0.7% WoW). Equities momentum models remain the only positive-performing model over the past three months (+6.9%), with rates and FX suffering (-0.6%).

Ben Ford is a Researcher at Macro Hive. Benjamin studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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Momentum Models Turn Bearish JGBs Following BoJ Talk

Summary

Market Implications

Latest Signals

Model Performance

Ben Ford is a Researcher at Macro Hive. Benjamin studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.

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Momentum Models Turn Bearish JGBs Following BoJ Talk

Summary

Market Implications

Latest Signals

Model Performance

Ben Ford is a Researcher at Macro Hive. Benjamin studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.

Enter your email to read this Macro Hive Exclusive

Your comments

Cancel reply

Like these insights? Join our free newsletter for regular updates and trade ideas.

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