Category Archives:

macro and politics

How to get re-elected during a pandemic – lessons from CEE/CIS

The coronavirus crisis is having a profound and lasting effect on the global economy, with the vast majority of countries expected to get back to their 2019 level of economic output only in 2022. The consequences of the crisis are not just limited to the economy and to changes in human behaviour. In many countries of the CEE/CIS region, the crisis has coincided with election cycles and will le…

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Shinzo Abe is stepping down – what does this mean for Japanese markets?

Today’s headlines have been dominated by the news that Japanese prime minister Shinzo Abe has announced his resignation due to health reasons. While markets seem somewhat spooked by this, there’s reason to see this as a good entry point into Japanese assets rather than a reason to run away.

Abe’s health has been a topic in the news for some time now. I would argue that his stepping down on …

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The U.S. labour market is back with a vengeance

Wowsers, the U.S. labour market never ceases to amaze bond investors. After the cataclysmic April U.S. employment report—nonfarm payrolls (NFP) had dropped by 20.7 million and the unemployment rate had shot up to 14.7%—there was broad agreement amongst market observers that May would prove to be another challenging month. In a Bloomberg survey of 78 economists, the most bullish forecast was a …

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Road map of a t-shaped “recession”: where are we now?

We are currently in the throes of the sharpest and largest economic downturn the modern global economy has ever seen. However, as I wrote in March this is very different from previous recessions.

To recap, a recession has three stages:

Stage 1: into recession

A rapid, record collapse in economic growth as normal economic life is dramatically curtailed for public health re…

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This time is different: a stay at home Flash Crash t-shaped recession

Whenever there is the threat or the reality of recession, it usually follows a typical pattern. It is engendered by tight financial conditions, a real or market bubble bursting, a dramatic rise in the price of oil, or a combination of the above. This time it is different: a stay at home recession.

The 2020 economic slowdown isn’t due to any of the usual suspects, namely the US …

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Ukrainian bonds have delivered one of the highest returns in EM this year

Can Ukraine continue outperforming?

Ukrainian fixed income assets have performed better than
expected this year, and delivered one of the highest returns in the emerging
market universe. Since the beginning of 2019, Ukraine’s five-year USD bond
spread has tightened by about 370bp, while the JP Morgan EMBI saw spread
compression of just 70bp year to date. Political novice Volodymyr Zelenskiy and
his Servant of the People (SP) par…

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Will the Bank of England join the loose money bandwagon?

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…

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Would demutualising Germany’s Sparkassen (savings banks) kick-start consumption growth and give the eurozone a boost?

This week the 10-year German bund yield hit a new record low of -0.33% in the wake of Draghi’s Sintra speech which had echoes of his 2012 “whatever it takes” declaration. Why so dovish? Manufacturing data from the eurozone has been universally bad lately, and inflation expectations are collapsing. The core inflation rate is now just 0.8% and the ECB’s 2% target looks an impossible goal. The mar…

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A life less easy for the ECB

Back in 2017, the economic outlook was increasingly rosy for the Eurozone. After years of ultra-loose monetary policy, a synchronised global recovery was in train. The Eurozone economy expanded apace, regularly surprising to the upside, unemployment continued to fall, the banking system had partially recapitalised and funding costs for corporates and sovereigns alike remained low on any measure…

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Are the European Commission and the IMF right about Italy?

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…

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