A 'seismic change': Bank of America is doing $1 billion bond trades in minutes! Thai baht’s strength weighs on tourism and exports; US oil supplies face off against demand weakness

  • $1 billion credit portfolio and ETF trades, once a relative rarity, are becoming commonplace at Wall Street’s top banks. Upgrades and investments in technology, along with an embrace from large asset managers, has made the process of pricing up and executing hundreds of bonds at a time quicker and cheaper
  • Amid the broader active-to-passive investment revolution, the assets of bond ETFs in the US surpassed $1 trillion for the first time in June
  • Bank of America is betting the ETF and portfolio-trading revolution in FICC is just beginning, and that investor demand for liquidity and transparency will further rev up the market

• In a trend that would seem to contradict the key economic indicators, the Thai baht has risen 5.4 per cent against the dollar this year, making it south-east Asia’s best performing currency and one of the strongest of emerging markets
• Thai assets are yielding healthy returns relative to the rate at which investors can borrow money elsewhere, at a time when many central banks are easing
• While the strong baht is hurting the competitiveness of Thailand’s tourism and goods exports, the central bank could be avoiding cutting rates because of concerns regarding rising household debt

• A brutal sell-off in oil after US president Donald Trump said he would place a 10 per cent tariff on $300bn of additional Chinese goods will amplify concerns about weaker global economic growth and the demand for crude
• Oil supply from outside the cartel, propelled by the US, is expected to expand by 2.1m barrels a day to 67m b/d. The growth will far outpace any increase in global demand of 1.4m b/d meaning fewer Opec barrels will be required to meet total expected consumption
• Rising tensions between Iran and western powers since US sanctions were imposed on the Opec producer have hit its oil exports. Supply risks have also been amplified due to unplanned outages in other Opec countries such as Venezuela