Political turmoil in Italy and Spain, escalating trade tensions and, for good measure, unexpectedly strong US employment data – to say that markets had a turbulent few days would be an understatement. Taking a step back, here are three lessons I took away from last week.
(1) Market sentiment shifts can be brutal
Political risks in the European periphery are real – a statement that might sound t… Read the article
Persistent structural weaknesses, imbalances, and financial fragilities. These were some of the ways in which the International Monetary Fund (IMF) described the Italian economy in its most recent country report. Almost a decade after the great financial crisis, Italy’s economic prospects remain dim, with the costs borne disproportionately by the working age and younger population. With no gove… Read the article
Creating a Eurozone-wide safe asset and thus diversifying sovereign risk within the currency union without the need for sovereign debt mutualisation – sounds like having your cake and eating it, doesn’t it? Well, according to the European Systemic Risk Board (ESRB), sovereign bond-backed securities (SBBS) might do the trick. SBBS are merely an idea, discussed in ESRB working papers, feasibility… Read the article
Today marks five years on from Mario Draghi’s now famous ‘whatever it takes’ remarks, widely credited with sparking a reversal in the Eurozone’s fortunes.
Below are five charts offering some insights into the European Central Bank’s successes and failures in the ensuing period, as well as some of the challenges that remain.
- Funding costs in the periphery
Five years ago, funding costs for the … Read the article
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
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
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
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
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
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