Tag Archives:

monetary policy

“A grip on the public finances”. Redeeming war loans as UK borrowing rises.

As you know, we’ve always been fascinated by the UK’s War Loans and have written about them repeatedly on this blog (here’s what we wrote in 2011 when we suggested that they should be redeemed). Bonds and war go together hand in hand, and for most of history rising government debt levels have been directly caused by the cost of financing conflicts, or the reparations afterwards. The several out…

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Bad loans in banks to be regulated by ECB total €879 billion

Happy Halloween. It’s time for some scary charts.

Halloween is around the corner and that can only mean one thing… scary chart time. Every year around this time, we highlight economic variables and statistics that could give central bankers nightmares. If stuff like non-performing loans, bad forecasts and big numbers scare you then it is probably time to turn off your computer screen and forget you ever saw this blog. The following is not for …

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Is China really growing at 7.5%? Not according to Citigroup’s ‘Li Keqiang index’

Say what you like about controversial whistleblowing website WikiLeaks and its embattled founder Julian Assange, but the organisation has lifted the lid on a number of rather glorious indiscretions alongside the more serious leak of military secrets that it has become notorious for.

One such nugget to be revealed was how Li Keqiang – now Chinese premier, but at the time the lesser known head of…

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It’s the regulation, stupid: the ECB’s ABS purchase programme

The ECB is finally joining the Quantitative Easing (QE) party. Un-sterilised asset purchases have been a major policy tool in most of the developed world over the past few years but next month (as the Fed ends theirs, incidentally) the ECB will make its first foray into QE proper by embarking on an asset backed security (ABS) purchase programme.

Through this programme, focused on “simple, trans…

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“Global greying” could mean getting used to ultra-low bond yields

The developed world is going through an unprecedented demographic change – “global greying”. This change is having a massive impact on asset prices and resources as populations around the world get older and live longer. It is also having an impact on the effectiveness of monetary policy. We would typically expect older populations to be less sensitive to interest rate changes as they are large…

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A tool for a rising rate environment: high yield floating rate notes

We are entering a new era for interest rates in the developed world. The extended period of ever looser monetary policy is starting to draw to a close. In the wake of the tapering of quantitative easing (QE) from the Federal Reserve (Fed), investors now expect to see the first interest rate hikes in many years, initially in the UK and shortly afterwards in the US. The principal focus of the deb…

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What could possibly derail the global economy?

Things are looking pretty good for the global economy right now. The U.S. Federal Reserve is slowly reducing quantitative easing, China is continuing to grow at a relatively rapid pace, the Bank of England is talking about rate hikes, and the central banks of Japan and Europe continue to stimulate their respective economies with unconventional and super-easy monetary policy. The International M…

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Deflating the deflation myth

There is currently a huge economic fear of deflation. This fear is basically built on the following three pillars.

First, that deflation would result in consumers delaying any purchases of goods and services as they will be cheaper tomorrow than they are today. Secondly, that debt will become unsustainable for borrowers as the debt will not be inflated away, creating defaults, recession and fur…

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Bundesbank: no deflation in sight. Really?

Today I came across an article in which the Bundesbank took the festive season as an opportunity to discuss if all the Christmas sales discounts are going to turn into a permanent phenomenon for the Eurozone. “No deflation in sight” (in German) concludes that the Eurozone is unlikely to experience continuously falling prices, ie deflation. The Bundesbank does however identify some parallels bet…

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US Treasuries – are we nearly there yet? Maybe we are.

Before we get all beared up about tapering, it’s worth seeing how far we’ve come already, and what the end game should be. The sell-off in US Treasury bonds has already been severe. 10 year yields have risen from a low of 1.4% in July 2012 to nearly 3% today. Most street strategists have yields rising further in 2014, with the consensus 10 year forecast at 3.37% for a year’s time.

But as well a…

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