The LTP Trade Finance Index™ rose 0.40% during the month of September, the second highest monthly return so far this year, and one fueled by a fall in one year LIBOR rates of 0.13%. The following table breaks down the performance for the Index between capital appreciation and interest accrual (note that because of compounding effects, the constituents may not sum to the total):
| Accrual | Capital | Total Ret | |
| January |
0.28%
|
0.05%
|
0.33%
|
| February |
0.25%
|
0.09%
|
0.34%
|
| March |
0.27%
|
-0.02%
|
0.25%
|
| April |
0.27%
|
0.04%
|
0.30%
|
| May |
0.25%
|
0.24%
|
0.49%
|
| June |
0.24%
|
0.13%
|
0.37%
|
| July |
0.24%
|
0.02%
|
0.26%
|
| August |
0.23%
|
-0.13%
|
0.10%
|
| September |
0.25%
|
0.15%
|
0.40%
|
Within the sub-indices the trend seen in previous months has continued through September. Our LATAM and EMEA indices have benefited from credit margin contraction in Brazil and Turkey, while outside these countries there have only been minor reports of changes. From our weekly market survey it appears as that Brazil and Turkey continue to be the main focus of the market and where liquidity has been concentrated. Our LATAM index continues to outperform. Although the headline credit margin in the EMEA region fell by marginally more than that in LATAM the higher level of absolute margin in Latin America means that it has a it will consistently outperform by 0.13%.
| 30-Sep-03 | MoM Change | YTD Change | |
| Total Return |
1,231.58
|
0.40%
|
2.90%
|
| Av Spread (bps) |
158.85
|
(2.06)
|
(39.98)
|
| LATAM |
1,232.33
|
0.54%
|
5.10%
|
| Av Spread (bps) |
308.52
|
(3.54)
|
(128.23)
|
| EMEA |
1,270.29
|
0.42%
|
2.55%
|
| Av Spread (bps) |
153.69
|
(3.92)
|
(10.89)
|
| ASIA |
1,203.59
|
0.29%
|
1.60%
|
| Av Spread (bps) |
55.43
|
0.02
|
(2.15)
|
Since April and the end of the Iraqi war, the Index has experienced a consistent reduction in the average credit margin and an environment where overall return volatility has been low. The return of the Index depends on two factors, the changes in the average credit margin and changes in the underlying one year LIBOR rate. In times when credit margins are stable the Index is more highly correlated with changes in underlying LIBOR. As credit margins compensate the owner of an asset for the perceived risk of holding that asset; the historic credit volatility contributes to perceived risk. If historic volatility is low then, ceteris paribus, perceived risk is low, so one may expect credit margins to contract.
Further information on the LTP Trade Finance Index™ can be obtained by contacting:
Tel: (+44) 020 8899 6814
