Historically, one of the defining characteristics of emerging market (EM) economies has been that they generally have not been able to use monetary policy to stimulate their economies during crises in the way developed markets (DM) have. Usually, they have had to hike rates to limit capital outflows and defend their currencies, in doing so making economic recovery more difficult.
This … Read the article
James Carville was candidate Bill Clinton’s chief strategist for the 1992 election. When asked to emphasise the single most important issue to voters, Carville responded: “It’s the economy, stupid!” Incumbent President George W.H. Bush at that time had seen his poll numbers surge post the successful Operation Desert Storm in Kuwait, but at home the US economy had started to slip into a recessi… Read the article
Earlier this week, China’s Central Bank (the PBoC) announced a further cut to the 1 year loan prime rate, one of its key interest rates, from 4.05% to 3.85%. This further loosening of monetary policy demonstrates that, as China attempts to extricate itself from the COVID-19 crisis, the domestic and international pressures on the world’s second largest economy remain severe, and the outlook hi… Read the article
“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”
If that is the case then developed economies have not encountered any muggers, armed robbers or hit men for some time.
That quote came from Ronald Reagan, candidate for US President in the late 1970s, back when controlling inflation was one of the biggest challenges for governments and ce… Read the article
Last week I interviewed Philip Coggan, the Economist journalist who writes the Bartleby column. His new book, “More: The 10,000 Year Rise of the World Economy” is out now, and it’s essential reading for anyone at all interested in the development of the global economy from the caveman through to the tech giants of today. One review of the book I read suggested it was a 21st century update to A… Read the article
This week has seen risk-off sentiment back with a vengeance as the Coronavirus outbreak dominates news headlines globally. Thus, investors are flocking to historically safe assets like low beta currencies, government bonds or investment grade corporate bonds with low default risks. However, can Japanese assets like the yen, nominal government bonds (JGBs) and inflation-linked government bonds … Read the article
Emerging market (EM) banks appear to be a defensive asset class – who’d have thought it? It certainly goes against everything we learned in the Great Financial Crisis (GFC). Surely banks are pro-cyclical beasts whose performance surges in times of economic plenty and struggles in more recessionary periods? In the world of Emerging Markets credit, however, things seem different. At least for se… Read the article
With European media outlets focusing on the coronavirus and storm Ciara this week, only little attention was given to the Irish general election held on Saturday. Undeservedly so, I’d argue, considering that the election results mark a seismic shift in Irish politics. The surge of Sinn Féin, winning 24.5% of the first-preference vote, de facto ended the two-party dominance of Fine Gael (20.9%)… Read the article
There has been a wave of African eurobond issuance over the past decade. South Africa started the eurobond trend for the continent in 1995, but it has only been since the global financial crisis that push and pull factors have encouraged broader African issuance.
The asset class has grown to 21 African countries with outstanding sovereign eurobonds, totalling $115 billion. This follows a … Read the article
2019 proved to be a spectacular year for returns in most asset classes and emerging market debt was no exception. Returns were driven by a combination of cheaper valuations to begin with and also helped by the market-wide U-turn in going from pricing in Fed hikes to cuts and by the subsequent US rate rally. Some key risks were also priced out as the year moved on, including the US-China trade … Read the article