29.10.2021
Qi Credit Impulse
Qi’s credit impulse suggests global markets are experiencing a sharp tightening in financial conditions. That is true for all, but especially in the US, Europe & UK.
Measures of credit impulse & financial conditions are not new. Several versions exist, all with subtle variations in the indicators they include & the methodology employed to calculate them.
Measures of credit impulse & financial conditions are not new. Several versions exist, all with subtle variations in the indicators they include & the methodology employed to calculate them.
Qi includes a range of factors in our models that speak to the ease of obtaining credit, the availability of liquidity & overall financing levels. They include:
- Investment grade & high yield credit spreads
- Central Bank rate expectations (STIRT calendar spreads)
- Central Bank QT expectations (interest rate volatility)
- the availability of US Dollar liquidity (cross-currency basis swaps)
- the level of real yields
- the shape of the yield curve
- currency strength in TWI terms
All are in z-score terms, showing how far each factor is from its long term trend. They are simply aggregated together & then the mean displayed here with a lower (higher) number pointing to tighter (easier) credit conditions.
In absolute terms, several of these indicators will have been significantly tighter in the past. However, in terms of the rate of change relative to trend, markets are experiencing a sharp squeeze in credit. Historically, such moves are not friendly for risky assets.
In absolute terms, several of these indicators will have been significantly tighter in the past. However, in terms of the rate of change relative to trend, markets are experiencing a sharp squeeze in credit. Historically, such moves are not friendly for risky assets.
