The Covid-19 crisis has been a very different recession in a number of ways. One that I think is particularly interesting is the role of banks. While it is a vast oversimplification, ask ten people what caused the great financial crisis, and nine will answer “the banks!”.
This time round, it has been the commercial banks that have helped many economies to remain functioning. Nowhere is that… Read the article
One common theme in market commentary of late has been the unprecedented use of the word unprecedented! One thing that used to be unprecedented and is now commonplace is central banks buying corporate bonds. Now this seems to have become conventional monetary policy, it is worth asking “why?” and “is this appropriate?”.
We first wrote about corporate bond purchases in 2009. Bac… Read the article
While it is certainly too early fully to understand the impact of COVID-19 on economies around the globe, one thing is for sure: the shock to economic activity is going to be enormous in the short run as sectors of the economy simply shut down. Having experienced one of the biggest corrections in history last month, financial markets have started to be somewhat more upbeat of late. Market part… Read the article
All eyes are on central banks these days as major monetary policy decisions have been driving global bond markets. The eagerly awaited September meeting of the Governing Council of the European Central Bank (ECB) has given bond investors much food for thought. In particular, the new round of its asset purchase programme (APP)—announced in true ECB fashion revealing only the bare minimum of de… Read the article
As the year of the 325th anniversary of the Bank of England’s foundation, and as the month of one of the Bank’s more important rate-setting decisions since 2008, September provides a congruous occasion on which to reflect on the history of the BoE and consider what the future holds for it. Founded in 1694 as a private bank to the government, it was in 1998 that the BoE was granted independence… Read the article
The positive and negative effects of central bank intervention after the 2007-08 financial crisis have been widely debated and are still – ten years on – not fully understood. For example, keeping borrowing costs artificially low for years has certainly helped spur economic growth (great), but by incentivising companies to take on more debt (not so great). The debt increase also makes me questi… Read the article
In its latest semi-annual statement, the Monetary Authority of Singapore (MAS) said it would slightly tighten monetary policy by increasing the slope of appreciation of the Singapore dollar Nominal Effective Exchange Rate’s (S$ NEER) policy band. This is the second increase this year, following one in April, and it confirms the broader monetary tightening recently seen in many Asian economies, … Read the article
M&G Investment Specialist Mario Eisenegger tells us from Santiago de Chile why some of the most overlooked Emerging Markets (EM) may offer opportunity. From Chile’s central bank or walking down the streets of Santiago, Mario says that investors should look beyond the headlines in order to find value and spot any potential risks.
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If you looked at the post-referendum changes in sterling versus the dollar, or the movement in gilts, you’d be forgiven for thinking that Brexit was done and dusted. The 10 year gilt yield has bounced back to around pre-referendum levels hovering around the 1.4% mark (in August 2016, 10 year gilts rallied to historical lows of 0.5%), while the front end of the yield curve has moved higher. Simi… Read the article
The flattening of the yield curve is carefully watched by investors as it is traditionally a good indicator of an economic slowdown. However, we always need to question conventional wisdom, and one thing we can say about the great financial crisis, and the great financial recovery, is that the actions central banks have taken to meet their mandates has been quite different this time.
The Fed ha… Read the article