Market Inquisitor

Tamen Dubito

LIBOR Tightening

As detailed in a Bloomberg article last week, a regulatory overhaul due to take effect October 14th, targeting money-fund industry has lead to a sharp increase in LIBOR as banks raise the cost of funding. The summer trading period was marked by surprisingly low volatility in the markets and strong cross asset correlation; this could be the explanation.

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Crude Positioning Pain

The spectacular failure of the Doha freeze negotiations on Sunday, where the 16 member delegation of major OPEC and Non-OPEC producers has led to an end of a 2 month rally in oil. Iran’s ambition to increase their production by 1 million barrels/day has led to a gridlock between Saudi Arabia and other players vying for market share. How is managed money positioned and what happens next?

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OPEC & Oil: Doha Meeting Outlook

Oil has seen a strong recovery since the February lows of $26.05, as the hope of an OPEC/Russia oil freeze lead to aggressive short covering by speculators. The DXY has also weakened signficiantly after comments by Janet Yellen, falling from the 98.5 level at the end of February to a current, dreary level of 94. Subsequently, as the dollar falls against major currency pairs, commodities, like oil denominated in USD rise inversely. Although investors continue to breath new hope into the oil price, like the OPEC deal will likely be an overall disappointment and lead to another leg lower in prices.

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After recommending the BMO Laddered Preferred Share ETF (ZPR.TO) in January, there has been an unexpectedly aggressively rally which saw the security rise from a low of $8.49 to the current price of $9.91. This post will serve an update on the security and future outlook on the performance of these shares.

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Crude Oil: Too Far Too Fast?

The aggressive run up in crude oil prices warrants a brief update on supply side fundamentals. This is outlook will cover the rest of March and early April.

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Fed Paradox: Here’s your dual mandate, now what?

In December 2015 the Fed raised their overnight rate for the first time in 8 years, and signaled that 4 more rate hikes were on the table in 2016. Shortly after market sentiment deteriorated, leading to skepticism about the central bank’s projected rate path. With data signaling that Fed should move more aggressively than the market is currently anticipates, the Fed is at a crossroads.

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Global Growth and Low Yields

Markets had one of the worst starts on record in the first 2 months of 2016. A collapse in crude oil prices, lead to concerns of high yield exposure, but more importantly lead to negative sentiment regarding growth. In this post I will be showing some of the drivers that are sending yields lower.

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Output Deal? or No Deal.

In the month and a half since my first post WTI has sunk twice to $26 low. As crude re-tested it`s previous $26 low, a tweet from a reporter who in the presence of a UAE minister stated that OPEC was ready to make a deal with other producers.

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Bullish on Preferred Shares: ZPR.TO

Preferred shares are an interesting synthesis of debt and equity, retaining unique aspects of both securities. Two overnight rate cuts by the Bank of Canada and global macroeconomic instability, has seen rate reset preferred shares tumbling, closely following the 5-year yield. I entered positions in ZPR, a preferred shares ETF, in mid-January and will discuss the bullish view for the Canadian rate reset preferred share asset class.

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