Epstein Secrets

GBP but lower versus AUD, CAD and most of Latin America and Asia. Thus, there has been little trend in the broad dollar, despite the 18bp backup in US Treasury yields this week. There may be some optimism towards the US economy and J.P.Morgan EM equity portfolio inflows Left axis shows EM equity portfoli

than trend shifts. • Last week, we raised our USD/JPY forecasts from a 2013 range of 75.85 to a range of 80-90. We have always been sceptical that the Bank of Japan would be able to drive up Japanese inflation and drive down real yields versus the US to power USD/JPY higher throughout 2013, but there is no deny

e appreciation of the yen, once again pushing the Bank of Japan’s (BOJ’s) 2% inflation target further into the futu

u of Labor Statistics BOE: Bank of England BOJ: Bank of Japan CAGR: compound annual growth rate CDS: credit de

Institution has called the “fiscal fights of the Obama administration.” The first fiscal fight resulted in the Standard and Poor’s (S&P) downgrade of US Treasury debt in August 2011. The equity markets, as measured by the S&P 500 Index, dropped about 19% between April and October of 2011. Taken together, the

75 70 65 60 55 50 1/1/2010 5/1/2011 8/4/2012 = 1/1/2014) 5/1/2015 = 9/1/2016 Source: BofA Merrill Lynch Global Research true against the JPY given the Bank of Japan is pegging 10y JGB yields at zero. We are cognizant of the possibility that the willingness of Japanese investors — who have already bought record am

=== 6m change in 30y real rates (RHS, inverted == USGGT10Y Index (R1) 5y5 | rates scale, %4) yoy real ra Source: BofA Merrill Lynch Global Research, US Treasury The BAML multi asset strategy index is not representative of all isk-parity funds. Si : BofA Merrill Lynch Global R h Source: BofA Merrill Lynch Glo

19). First, given USD/JPY’s significant correlation with 10Y yield differentials (>60%}, the anchoring of 10Y yields will further weigh on the Yen as US Treasury yields rise. Second, further Japanese fiscal stimulus will successfully lower real yields through higher breakeven rates of inflation while nominal y

kets over the medium term. Valuations remain attractive, and the potential for spreads to trend lower should more than offset the gradual increase in US Treasury yields in the quarters ahead. We continue to prefer increasing exposure to corporate bonds while keeping existing investments in sovereign bonds. 36

should profit in the medium term. e Longer-term debt issues and weak competitiveness of major exporters are hurting the Japanese economy. Therefore the Bank of Japan and Ministry of Finance will maintain an expansive policy and continue to try weaken the JPY. However, current positive growth dynamics are supportiv

Foreign Exchange We remain underweight the Japanese yen. The Japanese economy continues to weaken against its peers, leading to rising pressure for the Bank of Japan to engage in further quantitative easing. We have closed our preference for the Canadian dollar following its recent strength, and therefore close ou

uld spike. Note: Scenarios refer to global economic scenarios (see slide 7) What we're watching Why it matters Core market yields The direction of US Treasury and German Bund yields are important for EM fixed income spreads, especially for USD- and EUR-denominated bonds. Key date: Dec 6, European Central Ba