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
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
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
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
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
With the European Central Bank (ECB) purchasing €1.7bn of covered bonds last week, the Eurozone’s “QE-lite” programme has well and truly begun. Although the focus to date has been on covered and asset backed bonds, an article from Reuters last week spurred the market, due to a rumour that the ECB would soon be considering an extension to include secondary market corporate bond purchases. Althou… Read the article
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… Read the article