Monetary Policy

Interest Rates Risk Indicator

The FED's monetary policy and more specifically the entire US yield curve play a major role in the economy and contain important information and expectations about the future economy. The goal of the Monetary Policy indicator is to tell in which regime the economy currently is, to adapt investors' equity exposure.

Focused on Interest Rates

Robust Data Analysis

Alquant gathers interest rates data over a wide range of time horizons, from 3 months to 30 years, to build an unbiased and highly robust indicator. The relative analysis of interest rates at different horizons gives an insight into investors' expectations of the future economy in the coming months and years.

Dynamics of the Yield Curve

Identifying Trends

A yield curve is a graph in which the yield of fixed-interest securities is plotted against the length of time they have to run to maturity. Alquant uses the yield curve of the U.S. Treasury Bills, Notes, and Bonds. An upward sloping yield curve is considered as a sound economic environment, while an inverted or flat yield curve coincides with distress periods in which the FED heavily lowers interest rates to help recover from economic recessions. Alquant models the temporal evolution of this yield curve to estimate the current circumstances and trend. Thus, not only the position of the curve is used but also its recent movements, to give a signal as accurate as possible.

Deliver a Clear Signal

A Simplified Indicator

Instead of a complex output, Alquant offers the result of its analysis in the form of an indicator ranging from 0% to 100% on a daily basis. The value of the monetary policy indicator is inversely proportional to the exposure to global equity markets that an investor should take in order to maximise his risk-adjusted return. For example, a value of 20% indicates that economic conditions are fairly stable and optimistic and that an 80% exposure to the underlying index is optimal in terms of risk and return.

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Indicator High Risk

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