Fra BNP Paribas:
- The US Federal Reserve on Thursday announced several measures to ease any incipient signs of US dollar stress.
- The Fed also broadened its ongoing purchases of Treasury securities and injected USD500bn in the short-term lending market to address disruptions in the Treasury market.
- Also, starting Friday the New York Federal Reserve will buy a broader range of Treasury debt to be included in its monthly purchases of USD60bn. In addition to T-bills, it will now buy long-term Treasuries paying coupons, TIPS, and floating-rate notes.
- Our view: We believe the measures will help stabilize selective markets. However, for emerging markets we see a quick normalization or reversal as difficult. Asset prices have been hit considerably and market participants are still digesting big losses.
- We reiterate that any long or short, bullish or bearish, and/or hedging trade ideas pose a high directional risk. Capital preservation should be the priority.
- Earlier today, we closed all our structural positions in rates and FX in Latam, including Brazil and Mexico receivers and our EMFX portfolio. The only positions we now have are in Asia and in CEEMEA IR and FX.
