LTP Trade Finance IndexÖ - September performance update

The LTP Trade Finance Index - the independent total return index covering the trade finance asset class - was (like all financial indices) dominated in the month of September by the consequences of the US crisis. Renewed fears of global recession prompted two half point cuts in short-term US interest rates, of which 92 basis points were reflected in US$ LIBOR rates during the calendar month. This decisive move in interest rates generated a monthly capital gain of 0.87%, by far the highest recorded in 2001. Indeed, overall credit spreads on trade finance assets hardly moved, with a slight widening in Argentina and Brazil offset by tightening in Russia. The major South American economies (like Turkey) are sensitive to any loss of investor confidence in the global emerging markets, unlike Russia which (ironically) has come to be regarded as a safe haven. Despite all this, the secondary markets for trade-related paper have proved quite resilient throughout the crisis. Trading activity, whilst understandably subdued, has continued, with few sharp price corrections.