Category Archives:

Eurozone

Four years of the ECB doing “whatever it takes”

Transport yourself back to July 26, 2012. Borrowing costs for the “peripheral” European nations are uncomfortably high. Ireland, Portugal and Greece were in the process of applying for bailouts, while the Spanish banking system was dangerously close to falling over. It wasn’t a question of when an EU member would leave the single currency bloc, but who? Step forward ECB President Mario Draghi, …

Read the article

Which corporate bonds has the ECB been buying?

Having recently blogged about the potentially eligible universe of the Corporate Sector Purchase Programme (CSPP), we were naturally eager to find out which corporate bonds the European Central Bank (ECB) has actually been buying. On Monday, the ECB eventually published the highly-anticipated list of their bond holdings.

Except that’s not what happened. Instead of the ECB releasing a neat conso…

Read the article

The ECB, negative rates, and the Swiss experience

Ahead of tomorrow’s ECB monetary policy meeting, the market has high expectations of rates being cut further into negative territory (consensus is a cut in the deposit rate by 10 to 20 bps).  However, a report this week from the Bank for International Settlements (BIS) suggests that cutting rates further could be counterproductive and damaging for the banking sector.

The BIS’s quarterly review,…

Read the article
M&G YouGov survey

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…

Read the article

Greek debt forgiveness: Where there’s a will, there’s a way

The Euro Summit meeting in Brussels that took place a couple of weeks ago seems to have finally provided some temporary closure to the Greek debt crisis. The dreaded Grexit scenario was avoided (at least for the moment) and the Greek government was able to repay its arrears to the IMF and the ECB using the €7.2 billion bridge loan provided by the European Council. Looking ahead, this short term…

Read the article

M&G Panoramic Outlook: Jim Leaviss’ views for the second half of 2015

Deflation. Liquidity. Greece. These are the words of 2015 if you are a bond investor. The year started off with a bang, or rather a break, when the Swiss National Bank (SNB) announced the surprise abandonment of the peg with the euro. This was only a mere week before the European Central Bank (ECB) embarked upon an historic quantitative easing programme. Deflation took hold in Europe, governmen…

Read the article
Argentina saw a huge rebound in growth when it abandoned its dollar peg

Greece is not Argentina: don’t expect exports to drive growth if Greece leaves the euro

I have heard it said, semi-seriously, that the biggest risk for the Eurozone isn’t that Greece leaves the single currency and its economy collapses, but that it leaves and thrives.  In this scenario Greece starts again, debt free, able to adapt fiscal easing rather than austerity, and with a devalued “new drachma” encouraging an influx of tourists and a manufacturing and agricultural export boo…

Read the article

Greece, the currency vigilantes and the Expulso solution

It has been a while since we have discussed the economics of the single currency, but once again the issue of its suitability for all its members is at the forefront of economic concerns, as Greece faces some difficult decisions.

The financial crisis has taught us a number of lessons: fiscal policy works, monetary policy works, better regulation is beneficial for the financial sector, confidenc…

Read the article

Coming to a bond market near you: “A Brave New World: Zero Yield Corporate Bonds”

Picture the scene: a meeting room, 40 floors up, plate glass floor-to-ceiling windows with views of central London in the background. At the polished mahogany table sits Hans Schmidt, the CFO of a major consumer global goods company. In walks Chad “Ace” Jefferson III, the latest in a long line of investment bankers assigned to cover his company. Behind Chad follows an entourage of five impeccab…

Read the article

Europe needs a German fiscal stimulus package but won’t get it

The German government can theoretically borrow at negative yields if it were to issue short maturity debt today. Longer maturity debt is also yielding a record low amount. Could the collapse in yields be a blessing for Germany and Europe? Two economists at the International Monetary Fund (IMF) seem to think so. Indeed, the German government’s narrow-minded pursuit of the “black zero” (a balance…

Read the article