📑 Research Notes for 2023-04-24
This week, we look at the RMB gaining an allocation in world trade, Brookfield's default, where the 10-year might be going, and Argentina's massive rate increase.
We conduct extensive investment research and share the most interesting content that we come across every week. Here is a curated list of this week’s top observations.
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Last Week’s Market Performance Heatmap
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Renminbi's Share of Trade Finance Doubles Amid Ukraine War.
The renminbi's share of trade finance has more than doubled since the start of the Ukraine war. The currency's share by value of the market rose from less than 2% in February 2022 to 4.5% a year later, putting it in close contention with the euro, which accounts for 6% of the total. The gains reflect greater use of China's currency to facilitate trade with Russia and the rising cost of dollar financing. The US Federal Reserve has raised rates nine times since 2022, while the People's Bank of China has cut its benchmark loan prime rate twice over the same period.
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Brookfield Defaults on $161 Million Mortgage for DC Office Buildings Amid Remote Work Rise.
Brookfield has defaulted on a $161 million mortgage for a dozen office buildings, mostly in the Washington DC area, as borrowing costs surge and office occupancy continues to take a hit from the rise in remote work. This is part of a worldwide phenomenon, with other giants like Blackstone and WeWork also defaulting on certain office properties. While Brookfield claims that 95% of what they own are still Trophy Class A buildings, cracks under the surface are being watched as the commercial real estate market is closely monitored.
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Morgan Stanley Predicts 10-Year Treasury Yield to Reach 3.15% Amid Banking Tension and Trade Restrictions.
Morgan Stanley predicts that the yield on 10-year treasuries will be closer to 3.15% by the end of the year, but notes that there is still tension related to liquidity within the banking system. The dependence on the Federal Reserve's facilities and borrowing programs suggests that banking challenges are not yet behind us. Additionally, the tightening of financial conditions due to restricted trade supply has yet to be fully played out.
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Argentina Central Bank Raises Interest Rate to 60% to Stabilize Peso.
The Central Bank of Argentina has raised its benchmark interest rate to 60% in an attempt to stabilize the country's currency, the peso, which has lost more than half of its value against the US dollar this year. The move comes after the government announced new austerity measures, including a reduction in the number of government ministries and the imposition of export taxes on some goods. The country is currently in the midst of an economic crisis, with high inflation and a large budget deficit.
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Curated by Joseph Lu, CFA®
Joseph is the founder and managing director of Conscious Capital Advisors, and a CFA® Charterholder.
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