Authorised and regulated by the UK’s FCA to provide investment accounts, we are bound by CASS rules to segregate and protect client assets.
Holidays and Hedging
2020 has been an exceptional year, though by the third quarter we did find a more natural trading rhythm. August was a “holiday month” with desks on skeleton staff, lower liquidity in fixed income, and a slow melt-up in equity markets.
Throughout July and August, clients were hunting for yield and struggling to gain traction. Investment grade was especially tight in terms of pricing and clients moved toward high yield to gain any type of return . In the emerging market space, Egyptian bonds were in demand while Turkey was unwanted, mostly on FX fears. The UK GBP Gilt curve stayed in negative territory and that ensured GBP corporates were hard to find.
Fixed income new issues remained active as a result of low rates and central bank liquidity. Megacap names like Apple and Google that rarely come to market launched, opportunistically perhaps, but they are easy deals to pitch. Bank fixed income trading desks have already chalked up a record year in revenue terms and towards the end of the quarter there was a reluctance to risk price in secondary markets or negotiate.
Strong ETF inflows have been widely reported in the press, and we had clients purchasing both fixed income and commodity linked ETFs. ETFs are often used as hedging instruments, and thus while the daily inflows/outflows often receive banner headlines, the overall trend is more important – long-term money in and out of ETFs has to find its way out from or into the underlying asset class eventually. There seemed to be a higher percentage of automated portfolio trading out there in a range of fixed income corps.
FX hedging was a major theme of the quarter, and we had record FX client hedging activity.
US elections dominate the near future; markets hate the unknown, and volatility is already priced at a premium into November.
 ETFGI, https://etfgi.com/news/press-releases/2020/09/etfgi-reports-assets-invested-etfs-and-etps-listed-globally-broke
 Tradeweb, September Report, https://www.tradeweb.com/newsroom/monthly-activity-reports/