August 3 2018 Market Minute

August 3, 2018

Super Central Bank (SCB) Update
The Bank of England (BOE), Reserve Bank of India (RBI), and Czech National Bank (CNB) all raised its interest rates this week.

For the BOE this is its highest level, “.75%”, since the financial crisis ended. RBI has raised twice this year and now stands at 6.5%. CNB has raised rates 5 times this year now, and is 1.25%.

The US Federal Reserve also met this week but held rates steady at 1.75%-2%. The European Central Bank (ECB) met last week and continued to hold rates at -.04%. Yes, ‘Negative’, since March 2016.

Equity Markets Update
Equity markets were relatively ‘unremarkable’ this week except for the news that a US based company hit a new equity market valuation record of $1 Trillion Dollars. For the week, the company’s stock price rose 9%. A different US based company was close to this mile mark back in the late 1990’s but never hit it.

Bond Markets Update
Remember the (PIGS) acronym used during the EU Debt concerns of 2009-2013? Portugal, Italy, Greece, Spain.
Bond Yields in Italian Government Bonds were volatile this week with the 10 Year yield ranging from 2.784% to a little over 3% before falling back down to 2.921%.

Turkish Economic Facts
15.4% Annualized Inflation at it’s highest annual rate in 15 years.
Turkish Lira (Local Currency) is down about 25% vs US Dollar in 2018
Local Currency Bonds Maturing in November 2019 yields started 2018 at about 13% and are now at 21%.
International Monetary Fund predicts 5% of GDP Current Account Deficit for 2018 President Erdogan appointed his son in law Finance Minister last month
Turkey owes about $400 Billion in foreign currency denominated bonds, of which 1/3 comes due in the next 12 months and another 40% is floating rate debt.

Source: WSJ, IMF, Thompson One Financial

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