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monetary policy

Here are some of the scariest charts in finance to celebrate Halloween

Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively …

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Is it time for the Bank of England to target nominal GDP?

In December 2012, the then Governor of the Bank of Canada, Mark Carney, gave a speech entitled “Guidance” to the CFA Society of Toronto. Less than two weeks earlier, the UK Chancellor of the Exchequer, George Osborne, had announced that Carney would be the 120th Governor of the Bank of England (BoE). As this was Carney’s first public engagement since the announcement, traders and market economi…

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Which bonds have benefitted most from the ECB’s corporate bond buying programme?

European investment grade (IG) corporate bond spreads are now more than 40 basis points tighter than in early March 2016, before the European Central Bank (ECB) announced the expansion of its quantitative easing programme into the € IG corporate bond space. The technical tailwind provided by monthly bond purchases to the tune of around €7.5 billion from June onwards under the ECB’s corporate se…

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The Israeli Shekel: Flying under the radar

Though the recent US Treasury report did not name any country as a currency manipulator (see more details on this in Mario’s blog), the monitoring list centres on larger economies that meet the following criteria:

  1. The country has a significant bilateral trade surplus with the United States defined as more than USD 20 billion.
  2. The country has a current account surplus of at least 3% of GDP and …

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The US has not labelled Switzerland a currency manipulator, yet

Switzerland has made headlines of late as a potential candidate to be labelled a currency manipulator by the U.S. Treasury. For those countries at risk, a report recently published by the U.S Treasury sets out three key criteria the U.S. Treasury will use in order to assess whether a country is “pursuing unfair practices”. Firstly, the country would have a significant bilateral trade surplus wi…

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A whole new ball game. M&G 2017 economic and bond market outlook.

In our latest Panoramic Outlook, Jim Leaviss has a look at the forces that resulted in a tumultuous year for establishment politics, the ECB’s quantitative easing dilemma and the prospects for emerging markets in 2017. For the first time since the financial crisis, it appears that bond yields will come under sustained pressure as central banks gradually remove monetary stimulus. The impacts of …

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Swiss bank account holders: negative interest rates are here to stay

It was big news when Postfinance, the first Swiss bank categorised as “too-big-to-fail”, announced the introduction of negative interest rates to customers holding deposits of CHF 1 million and above. Many are now asking how long it will take until banks apply this approach to retail savers. I would argue that it may not be too long given the situation for Swiss banks remains challenging.

Part …

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The Bank of England could be about to unveil a bumper monetary policy package

Despite keeping interest rates on hold at the 4th July meeting, the minutes of the Monetary Policy Committee indicated that “most members expect an easing in August” (even long-time hawk Martin Weale has shifted to a dovish stance). Subsequently, markets are pricing in a staggering 98.3% probability of a rate cut at the next meeting in 8 days’ time. With UK data expected to deteriorate over the…

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Will the €500 note trade at a premium or discount once the ECB stops printing them? The poll results are in…

Earlier this week Richard Woolnough wrote a blog about negative rates and tax on interest.  In it he also suggested that once the ECB stops printing the €500 note and ends issuance of its existing notes at the end of 2018, the legacy notes will trade at a premium.  The argument is that because the notes will remain legal tender across the Eurozone, demand for a note with the lowest storage cost…

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Negative rates – a tax on saving? Don’t forget about actual tax

There has been much discussion recently that by introducing negative rates central banks are effectively taxing savings. This is self-explanatory, and is one of the criticisms of how negative rates can distort economic behaviour. This however is not a new phenomenon.  Let’s not forget that money has always been effectively clipped by the traditional enemy of savers – inflation. Fortunately, hol…

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