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Affinity Policy Comment 22 may 2023

Push It To The Limit

US President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, less than two weeks before a 1 June deadline, after which the Treasury expects the federal government will struggle to pay its debts. A failure to lift the debt ceiling would trigger a default, likely sparking chaos in financial markets and a spike in interest rates.

In the Treasuries market, debt ceiling concerns have created large distortions in the short-end of the yield curve as investors avoid bills that come due when the Treasury is at risk of running out of funds.

The yield on the one-month Treasury bill jumped by 15 basis points to 5.6677 per cent on Monday. Two-year yields last stood at 4.2429 per cent, pulling away from a recent two-month high, while the 10-year yield also dipped to 3.6574 per cent.

On Friday, reports that the debt ceiling negotiations had reached an impasse rattled markets even as Federal Reserve Chairman Jerome Powell said US interest rates might not need to rise as much given the tighter credit conditions from the banking crisis.

Currently, futures are pricing in close to a 90 per cent chance that the Fed will keep rates unchanged at its next meeting in June, and a total of almost 50 basis points of cuts by the end of the year.

That has knocked the dollar off a two-month top against a basket of major peers, though the index found some support from safe-haven bids and was last 0.15 per cent higher at 103.19.

Meanwhile, the US bank system has been rattled once again, as Treasury Secretary Janet Yellen reportedly warned that more mergers may be necessary after a series of bank failures.

Still, despite slowing, US hard data has continued to hold up well, while surveys like Empire Manufacturing or NY Fed Services Business Activity have turned more negative.

Looking East, China’s data is slowing, as weaker PMIs, credit data and inflation disappoint the reopening narrative for now. In addition, capital outflows continue, and investors remain hesitant to invest amid a weakening macro picture, potentially easier monetary policy and ongoing geopolitical tensions.

USD-CNH broke through 7.0 last week, opening the door for further CNH weakness up to 7.30 and for potential PBC action, either through lower rates or currency interventions.

Overall, market sentiment remains bearish, as EPS growth expectations are near the bottom, cash allocations remain elevated and China optimism fades, according to BofA’s Global Fund Manager survey.

Markets are also digesting the implications of the Group of Seven's "de-risk, not decouple" approach to China and supply chains flagged at the group's summit on Sunday. Joe Biden said at the summit that G7 nations were more unified than ever in terms of "resisting economic coercion together and countering harmful practices that hurt our workers."

Still, Biden suggested a shift in US-China relations could occur soon, echoing his comment to reporters before his departure.

And on the issue of tensions between China and Taiwan, Biden said there was a clear understanding among most of the allies that, if China were to act unilaterally against Taiwan, there would be a response.

He also added that the US and G7 allies would not trade in materials that would allow China to build weapons of mass destruction, but insisted that it was not a hostile act.

Still on the geopolitical front, Russia claims to have achieved full control over Bakhmut, a city of limited strategic importance, where a Russian victory would be more symbolic.

As Ukraine’s spring offensive approaches, allies are stepping up their support. In early May, the UK became the first country to supply Kyiv with long-range cruise missiles, which enabled Ukraine to strike two industrial sites in the Russian-held Luhansk. The UK has already promised to send more but they have also highlighted that the missiles should not be used to attack targets in Russian territory.

In the context of G7 meeting in Hiroshima, US president Joe Biden announced a new USD 375 Mn support package for Ukraine. In addition, the US signalled that it would not block their allies’ export of F-16 fighter jets to Ukraine.

Despite rising optimism regarding Ukraine’s upcoming offensive, it seems better to err on the side of caution. Although Russia’s winter offensive was not that successful, they have fortified their defence lines in the anticipation of Ukraine’s counteroffensives. As a result, these might deter Ukraine from pushing back so hard they encounter heavy combat losses. Hence, a protracted battlefield stalemate remains the main scenario.


Affinity Research LLP

what we do

  • Carbon

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    Contact: Rahul Khanna
    [email protected]

    LNG

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Contact: Felix Hargreaves
    [email protected]
    +44(0)20 3142 0118

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    +56 99 887 3036
    Contact: Rahul Khanna
    [email protected]
    +61 418 448 677

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Contact: Felix Hargreaves
    [email protected]
    +44(0)20 3142 0118

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  • Floor 44
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    122 Leadenhall Street
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    Crows Nest, NSW 2065
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    Fortitude Valley
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  • #703, Shin-A Building
    50 Seosomun-ro 11gil
    Jung-gu, Seoul
    South Korea
    100-752

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    SEOUL

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  • 1301 McKinney Street
    Suite 2975
    Houston, Texas
    77010, USA

    T +1 832 925 7500

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    HOUSTON

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    1301 McKinney Street
    Suite 2975
    Houston, Texas
    77010, USA

    T +1 832 925 7500

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  • Marco Polo Parkside Building 1204,
    Anli Road No. 80,
    Chaoyang District,
    Beijing, China, 100101

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    BEIJING

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    Marco Polo Parkside Building 1204,
    Anli Road No. 80,
    Chaoyang District,
    Beijing, China, 100101

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  • 6/F Kimberley Plaza
    45-47 Kimberley Road
    Tsim Sha Tsui. Kowloon
    Hong Kong

    T +852 2154 2237

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    HONG KONG

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    6/F Kimberley Plaza
    45-47 Kimberley Road
    Tsim Sha Tsui. Kowloon
    Hong Kong

    T +852 2154 2237

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  • Room 04, 10/F, 500
    Yan'an West Road,
    Shanghai,
    People's Republic of China


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    SHANGHAI

    Dry Cargo


    Room 04, 10/F, 500
    Yan'an West Road,
    Shanghai,
    People's Republic of China


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  • Jirón Cruz del Sur 140, of. 1712,
    Santiago de Surco, Lima,
    Perú

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    LIMA

    Containers Dry Cargo


    Jirón Cruz del Sur 140, of. 1712,
    Santiago de Surco, Lima,
    Perú

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  • Augusto Leguia Norte 100
    Office 710
    Las Condes
    7550155 Santiago
    Chile

    T +56 22 352 7100

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    SANTIAGO

    Dry Cargo


    Augusto Leguia Norte 100
    Office 710
    Las Condes
    7550155 Santiago
    Chile

    T +56 22 352 7100

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  • Misiones St. 1372,
    1st Floor "De Los Patricios" Building,
    11000 Montevideo, Uruguay

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    MONTEVIDEO

    Dry Cargo


    Misiones St. 1372,
    1st Floor "De Los Patricios" Building,
    11000 Montevideo, Uruguay

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  • Viamonte 174, 4 to B,
    C1053ABD Buenos Aires,
    Argentina

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    BUENOS AIRES

    Dry Cargo


    Viamonte 174, 4 to B,
    C1053ABD Buenos Aires,
    Argentina

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  • Rua Barão de Cotegipe, 443, room 1310
    Porto de Gale Business Center
    Rio Grande
    Brazil


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    RIO GRANDE

    Dry Cargo


    Rua Barão de Cotegipe, 443, room 1310
    Porto de Gale Business Center
    Rio Grande
    Brazil


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  • Fascinatio Boulevard 742
    2909 VA Capelle aan den IJssel
    The Netherlands


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    ROTTERDAM

    Dry Cargo


    Fascinatio Boulevard 742
    2909 VA Capelle aan den IJssel
    The Netherlands


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  • Inkognitogaten 35,
    0256 Oslo
    Norway

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    OSLO

    Offshore


    Inkognitogaten 35,
    0256 Oslo
    Norway

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  • 104-111 21st St
    West Vancouver
    BC V7V 0C2
    Canada


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    VANCOUVER

    Dry Cargo


    104-111 21st St
    West Vancouver
    BC V7V 0C2
    Canada


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  • Kaigaten 12, 2nd floor
    Bergen 5016
    Norway

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    BERGEN


    Kaigaten 12, 2nd floor
    Bergen 5016
    Norway

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  • Rua Duque Estrada 36/101 Rio de Janeiro, 22451-090, Brazil

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    RIO DE JANEIRO


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