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The Fixed Income Intelligencer

Volume I, Issue II

(Fixed Income and Currencies) BUSINESS CYCLE FAVOURED ASSET CLASSES INDICATOR

8 May 2014

EMERGING MARKETS CURRENCIES Emerging Markets Curriencies 52-Week Returns

EM Carry Trade 3800

CHILE ICELAND15% S KOREA 10% 5% POLAND 0% -5% ARGENTINA -10% HUNGARY -15%

S AFRICA INDONESIA

LuzCap

3300

PHILIPPINES THAILAND

Naïve

2800

Trade

2300

TURKEY

1800 HONG KONG

MEXICO

CZECH

1300

PERU

INDIA COLOMBIA

TAIWAN SINGAPORE

800

BRAZIL

Indicator is bullish for asset classes (bonds, equities, commodities) crossed by radial red line.

Left, the percentage return on a long position earning interest in each emerging market currency. Right, the performance of a portfolio of 20 major EM currencies. Naïve strategy weighs the 20 currencies equally; trade strategy weighs them by total exports and imports as reported by International Monetary Fund; LuzCap strategy selects 5 currencies with a proprietary algorithm. Each rebalanced daily. (USD returns)

G-10 MAJOR CURRENCIES

G10 Currency Strategies

Momentum

2200 2000 1800 1600 1400 1200 1000 800 600

EUR CHF 6.14% 6.18%

Value

GBP 9.75%

Excess ratio of Spot to PPP 40% 30%

SEK NZD 1.45% NOK JPY 0.88% -2.18% -1.30%

20% 10%

CAD AUD -7.59% -7.52%

0% NZD

AUD

CHF

EUR

GBP

NOK

CAD

SEK

JPY

-10% LuzCap

Carry

Momentum

Value

-20%

LuzCap strategy combines carry and value strategies using a proprietary algorithm. Carry strategy goes long the 3 highest interest rate currencies and shorts the 3 lowest. Momentum strategy longs the 3 currencies with highest 52-week nominal currency rate return and shorts the 3 lowest. Value strategy longs the 3 currencies most undervalued as measured by ratio of spot rate to Bloomberg PPP (Purchasing Power Parity) and shorts the 3 most overvalued. All rebalanced daily. (USD returns)

FIXED INCOME STYLES

Global Long Term Bond Indices

Style Premia 2600

1600 1500

LongTerm Govt Prem

2400

US

1400

Corp Prem

2200

Global ex-US

2000

EM

1300

Mortgage Prem

1200 1100

1800 1600 1400

1000

1200

900

1000

800

800

Source: Morningstar. Indices are Long-Term US Government Total Return, ex-US Government Bond Index Total Return,

Emerging Markets Sovereign Bond Index Total Return

SeaGate Capital Corp. is a licensed broker-dealer supervised and regulated by the Superintendent of the Securities Market of Panama. These materials have been prepared for information purposes only utilizing macroeconomic and other data accumulated by third parties. These materials which has not been verified by SeaGate Capital do not constitute an offer, selling material, or a recommendation to enter into any transaction and is not intended to be relied upon in making (or refraining to make) any specific investment or other decisions. The information contained in this presentation has been prepared without reference to a particular person´s investment requirements or financial situation. SeaGate Capital is not acting as your financial advisor or in a fiduciary capacity in respect of any transaction with you unless otherwise expressly agreed by us in writing. Before entering into any transaction you should take steps to ensure that you understand the transaction and have made an independent assessment of the appropriateness of the transaction in light of your own objectives and circumstances, including possible risks and benefits of entering into such transaction. The dissemination of these materials should not be construed by any party as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation.

The Fixed Income Intelligencer SeaGate Capital  

Edition: May 8, 2014

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