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New M&G YouGov survey: there’s very low support in Europe for sovereign bailouts

Our new survey, carried out with YouGov across several EU member states (the UK, France, Germany, Italy, Spain and Austria), shows that there is a low level of support for future sovereign bailouts in the event of debt crises and economic difficulties.  The following question was asked as part of the M&G YouGov Inflation Expectations Survey – the full survey will be released here in early Octob…

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Featured Post

UK inflation: are transient and volatile items masking an improving domestically generated inflation picture?

This morning CPI in the UK has fallen from 0.1% in July to 0% in August, both in year-over-year terms. Continuing deflationary trends observed in transport (largely petrol) and food (supermarket price wars), which have together taken 0.7% off CPI over the last year, were dragged back up to the zero bound by alcohol and tobacco (these always go up!), education and restaurants and hotels, with sm…

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El Niño is coming. What are the effects on GDP, commodity prices and inflation?

Whilst economic forecasters are currently concerned about falling oil prices and the implications for global growth, weather forecasters worry about the impact an El Niño weather event could have on global weather patterns. In August, America’s National Oceanic and Atmospheric Administration (NOAA) said there is a 90% chance that the current Niño event will continue through the remainder of the…

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2015-09 blog RW

We are there – nothing to fear

The Bank of England’s Monetary Policy Committee (MPC) are due to meet on Thursday and most economists expect a dovish set of minutes to accompany the announcement of no change in the BoE base rate. Additionally, the minutes will likely emphasise the risks of a persistent undershoot in UK inflation given the continued fall in commodity prices and waning global demand. Despite these risks, the MP…

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The cost of quality: spread differentials between IG credit rating bands

We have frequently written about investment grade (IG) credit spreads over the course of the past year. Today I’m going to dissect the IG universe further and take a look at quality spreads, i.e., the additional risk premium investors can earn when switching from one credit rating band into the next lower band.

The chart below shows how the differential in asset swap (ASW) spread between AA and…

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BoE September Easing

Contrary to popular opinion, the Bank of England’s next move will be a monetary easing

On the 7th of September £38bn worth of UK gilts (4.75% 2015) will mature. The Bank of England (BoE) own just under half the issue, having purchased the bonds through its £375bn quantitative easing (QE) programme. At this point in time, the BoE have indicated that they are committed to keeping the size of the QE program at £375bn. As a result of the 2015 bonds maturing, the bank will therefore h…

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Commodity carnage and mayhEM – how exposed are High Yield markets?

We have seen a fairly swift and deep sell off in both commodities and emerging market equities over the past few months. The recent moves are now feeding through into a more broad-based sell off in risk assets. It appears an opportune time to take stock and see how exposed the various high yield markets are to these trends.

In order to assess any impact, I will firstly consider direct exposure,…

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Robotisation rates are correlated with demographics

“We need to hike…so that we have room to cut if we need to”. Eh? And some robot stuff too.

I keep hearing the argument that the Fed needs to hike, so that if the US economy slows down again it will have room to cut rates once more.  In other words it needs to get away from the zero bound so that the traditional monetary policy tool of rate cutting comes back into play in the future.  In less cerebral moments I may have made this argument myself, but I’m struggling to remember why it …

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Covenant case study – after the good, the bad

We recently highlighted a bond covenant that benefited fixed income investors. After the good, this week we have seen the bad. In this case, a bond covenant may impact bondholders in a detrimental way. Both examples are evidence of how critical it is to have a thorough understanding of bond documentation ahead of investing in a bond.

Kuwait’s third largest bank, Burgan Bank, announced in a regu…

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“Something Will Turn Up” by David Smith of the Sunday Times. Video and competition to win a copy of his book.

How did the UK go from a manufacturing powerhouse in the 1950s, to economic destitution in the 1970s?  Is the history of post-war UK economics one of policy mistake after policy mistake?  And are Britain’s political and financial institutions better placed today to make good, long term decisions than they were in the past?  In the latest of our series of interviews with authors of new economic …

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