Fixed Income & Currencies

A recent Deutsche Bank Quantcraft report ("Catching the Sentiment Waves", 22 Nov 2022), found strong predictability in the MarketPsych Analytics dataset for commodities, FX and fixed income quantitative strategies, outclassing the 12 other sentiment datasets assessed.

MarketPsych’s currency and country macroeconomics datasets analyse real-time media reports to derive sentiment and thematic indicators for 40+ currencies, 60+ sovereign bonds, and 50+ macroeconomic indicators. The data includes media sources in 13 languages from the top global economies. Time series scores provided include buzz, sentiment, and unique thematic scores such as economicGrowth, currencyMomentum, and Fear – all derived from textual mentions in news and social media.

Financial institutions and central banks also use this dataset to forecast / nowcast macro indicators such as rates, inflation and economic growth. One internal paper shows that forecasts using this data achieve a ~30% tighter fit to CPI values versus the expert consensus forecast using our InflationForecast index in an expanding window SARIMAX time series model.

Another MarketPsych study shows that sentiment data can enhance carry trade returns. Preferentially investing in currencies with high home country “fear” (risk perception), leads to higher and more stable carry-trade returns than investing in the highest interest rate currencies.

NN Investment Partners (NNIP, $300 billion AUM, acquired by Goldman Sachs in 2022) employs MarketPsych's Analytics to enhance its sovereign fixed income quantitative strategy. In NNIP's fixed income strategy, the inputs consist of traditional quantitative factors alongside MarketPsych's unique sentiment analysis. These inputs feed into a multi-factor model, which systematically combines the variables to generate precise trading signals on when to adjust positions in swap spreads. Read more in their paper incorporating MarketPsych data here.