Market complacency is misplaced - Nomura

Ross J Burland FXStreet

Analysts at Nomura are cautious in their outlook, explaining that there could be a case to be made for a higher correlation between rates markets.

Key Quotes:

"Over the past year, various political events have resulted in regional shocks to rates markets, but now with key elections behind us, rates markets can more easily follow the global cycle.

Indeed, before 2008, the correlation of G7 rates with each other was much higher than it is today."

"The correlation also tends to rise with the level of US yields. So a US bond sell-off could easily see other markets follow."

"Despite all of this, markets appear not to be too concerned. Demand for downside protection in the US equity market is fairly low and the FX option markets are showing little concern about an unwinding of carry trades.

We think this complacency is misplaced, and we would continue to position ourselves defensively over the coming months."

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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