ISMS 14: Regional Interest Rates - Low in Asia, Egypt and Frontiers on Fire

Developed Market Regions - ST rates about to peak, LT rates are falling, inverted yield curve in DM Americas and Europe widenedInterest rate overviewDM Americas 3m yield 4.8%, DM Europe 3%, DM Pacific much lower at 1.1%DM Americas 1yr yield 4.6%, DM Europe 2.8%, DM Pacific same as 3m yield at 1.1%DM Americas 10yr yield 3.5%, DM Europe 2.9%, DM Pacific 1.4% is higher than 3m and 1yr yield, normal yield curveYear-on-year changesBiggest rise of 3m yield in Developed AmericaWorld 3m yield was up 3.2ppts, DM Americas up 4.3ppts, DM Europe up 3.3ppts, DM Pacific up 1.1pptsFollowing 3m yield, 1yr yield YoY changes were most prominent in DM Americas and DM EuropeWorld 1yr yield was up 1.9ppts, DM Americas up 3ppts, DM Europe up 2.9ppts, DM Pacific up 0.8ppts10yr yield in DM Europe and DM Americas widened fastest, little movement in DM PacificWorld 10yr yield was up 0.9ppts, DM Americas up 1.2ppts, DM Europe up 1.8ppts, DM Pacific up 0.4pptsRate progression3m yield has risen most aggressively in DM AmericasDM Europe yield moved at a similar pace to WorldDM Pacific yield only rose slightly, widening the 3m interest rate differential to other DM regionsUnlike World, 1yr yield has fallen in all DM regions in March 202310yr yield in DM Americas and DM Europe moved up simultaneouslyDM Pacific 10yr yield stayed almost flatAll DM 10yr rates fell MoM in MarchYield curveDM Americas yield curve has inverted the most among all DM regionsIn March 2023, the 3m yield was 1.3ppts higher than the 10yr yieldThe degree of inversion is similar to WorldDM Europe yield curve just inverted in March 2023The yield curve turned to negative territory as the 10yr yield dropped in March by 0.4ppts compared to FebruaryThough the inversion is much less extreme compared to WorldDM Pacific sees flattening yield curve over the past 12 months, but remains positiveAs of March 2023, the long-term 10yr yield was 0.3ppts higher compared to the short-term 3m yieldOne year earlier, the difference was 0.9pptsKey pointsST rates in DM Americas and Europe risen more aggressively than World, DM Pacific much slowerSmall increases in LT rate in all DM regions YoY, but fell MoMDM Pacific maintains a positive yield curve while inversion worsened in DM Americas and EuropeEmerging Market Regions - Massive ST rate hikes in ME&A and Frontier, LT rates more stable, no yield curve inversion in AsiaInterest rate overviewEM Americas 3m yield 12.7%, EM Asia 3.2%, EM Europe 14.6%, EM ME&A 52.7%, Frontier markets 23%EM Americas 1yr yield 12.6%, EM Asia 3.2%, EM Europe 9.4%, EM ME&A at 23% is half 3m rate, Frontier markets 17.1%EM Americas 10yr yield 11.2%, EM Asia 3.6%, EM Europe 8.8%, EM ME&A 10yr yield  at 15.4%, 1/3rd of 3m rate, Frontier markets 10yr yield 11.9%, half 1yrYear-on-year changes3m yield has risen in all EM regions; it was most extreme in ME&A and Frontier marketsEM Americas 3m yield was up 3.1ppts, EM Asia up 0.9ppts, EM Europe up 0.3ppts, EM ME&A 3m yield was up 43.2ppts, Frontier 3m yield was up 10.6ppts1yr yield saw a rise in all EM regions YoY, except in EM EuropeEM Americas 1yr yield was up 1.8ppts, EM Asia up 0.8ppts, EM Europe down 3ppts, EM ME&A up 9.2ppts, Frontier up 4.3ppts10yr yield surged in all EM regions, except EM EuropeEM Americas 10yr yield was up 1ppts, EM Asia up 0.1ppts, EM Europe down 2.7ppts, EM ME&A up 2.7ppts, Frontier up 3.4pptsRate progression3m yield has moved in different directions among EM regionsME&A and Frontier saw extreme increases in their 3m rates mainly driven by EgyptEM Asia and EM Europe actually stayed flat over the past 12 monthsSpotlight on Egypt Inflation went from 9% to 32% in 12 monthsRussia and Ukraine account for 80% of Egypt’s wheat importsSince the war, import prices  skyrocketed50% currency devaluation in 2016 and another 50% since March 20221yr yield in all EM regions higher than World, except Asia10yr yield in EM regions were less fluctuatingAll EM regions have a higher long-term 10y yield than WorldYield curveEM Americas yield curve inverted slightly more than WorldEM Asia yield curve is the only EM regions which didn’t see an inversion of its yield curve yetThough, the yield curve has flattened over timeIn March, the difference between the 10y yield and 3m yield was just 0.4pptsOne year earlier, the difference stood at 1.2pptsEM Europe yield curve inversion more than doubled over the past 12 monthsIn March 2023, the long-term yield was 5.8ppts higher than the 3m yield12 months ago, the difference was only 2.8pptsEM ME&A yield curve has massive inversionGiven the aggressive increase in 3m yield, the inversion amounted to 37.4ppts in March 2023This compared to no inversion one year agoFrontier yield curve stays inverted in March 2023, but a bit less MoMKey pointsST rates exploded in ME&A and Frontier, EM Asia and Europe were more cautious in raising ST ratesLT rates of all EM regions rose and remained above World; only EM Europe saw falling yield YoYAsia remains the sole EM region with no yield curve inversion, inversion looks painful for EM Europe, ME&A, and Frontier Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast