Risk markets are casualties of the yield curve steepening - Nomura

Bilal Hafeez, Research Analyst at Nomura, suggests that the biggest casualties of the global yield curve steepening have been risk markets.

Key Quotes

“Equities, credit and EM have all sold off. In FX, the worst performers since just before the ECB meeting last week have been the Mexican peso, South African rand and Brazilian real. The best performers have been the euro and dollar. In aggregate, cross-market risk is now out of deep “risk-seeking” mode, and has reverted to its three moving average.

In terms of the components, equity and credit appear to have adjusted most – both are above their three-month moving averages. EM risk has not adjusted much, though this could be due us only having Friday closing values rather than Monday values. Moreover, a period of EM differentiation could be starting. FX risk meanwhile appears to be laggard, which suggests there could be scope for FX volatility to rise.”