The arguments in favour of the euro surviving

Poor economic growth prospects, high unemployment, large debt burdens, poor public finances – it is all too easy for analysts and economists to say that the euro won’t be around indefinitely. Yet here we are, coming up to the five year anniversary of the Lehman Brothers collapse and having lived through a number of sovereign debt crises, and the euro remains the single currency for the Economic…

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Five reasons why the European high yield market is better value than its US cousin

Since the start of 2011 we have seen the onset of the Eurozone crisis, endemic political uncertainty, a return to recession and a de facto Greek sovereign default. Contrast this to the path the US has taken with aggressive QE, positive growth and a recovery in the housing market. The somewhat surprising fact is that in spite of all this, the European high yield market has outperformed its US co…

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You don’t expect any inflation in Europe? The Germans do. Look at their housing market!

Being a German abroad, I am very aware that one never runs out of German stereotypes to discuss. One of the stereotypes is the German obsession with price stability and fear of price instability. The latest results of the M&G YouGov Inflation Expectations Survey indeed confirm the current worry about inflation amongst the German public. The chart below suggests that Germans have an exceptionall…

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Higher mortgage delinquencies not necessarily bad for all RMBS

Moody’s, the credit rating agency, published a report a few days ago on the asset backed securities market. One section of the report has attracted some media attention – it details the agency’s thoughts on UK interest-only residential mortgage-backed securities (RMBS).

Moody’s reaches the fairly unsurprising conclusion that when interest rates start rising in the UK delinquencies on interest-o…

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First home owner grants – a gift to new home buyers, or existing?

We aren’t the first to have a look at George Osborne’s “Help to Buy” scheme. It has been met by warnings far and wide. Sir Mervyn King stated that “there is no place in the long run for a scheme of this kind”, whilst Albert Edwards from Societe Generale was a little more blunt when he wrote that it was “a moronic policy”. Even the IMF and the OBR are getting in on the act, warning that the sche…

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It’s a new dawn, it’s a new day. The ECB takes baby steps towards QE

Just when you thought the Fed had well and truly killed the carry trade, a surprisingly dovish Mario Draghi reminded markets yesterday that Europe remains a very different place from the US. Having previously argued that the ECB never pre commits to forward guidance, yesterday marks something of a volte-face. ‘The Governing Council expects the key ECB interest rates to remain at present or lowe…

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EM debt funds hit by record daily outflow – is this a tremor, or is this ‘The Big One’?

On Friday last week, EM debt funds saw a daily outflow of $1.27bn, which equalled the record set during the dark days of September 2011, a time when the Eurozone periphery and the ECB were particularly active bungee jumping down a precipice.   Outflows were even bigger on Monday this week, as EM debt funds were hit by $1.44bn in outflows.  The fact that Monday saw a daily record wasn’t much of …

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The M&G YouGov Inflation Expectations Survey

Today we have launched the M&G YouGov Inflation Expectations Survey with the aim of assessing consumers’ expectations of inflation over the short and medium term. There has never been a better time to gauge the views of consumers, with interest rates at multi-century lows, central bankers waist-deep in the experiment of quantitative easing and politicians wavering on whether or not austerity is…

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Video: whilst the market gets excited about unemployment falling to 6.5%, the Fed’s attention is turning to falling inflation

I spent a couple of days in New York last week seeing economists and academics. The US Treasury market had just seen a significant sell-off, with 10 year yields rising from 1.63% at the start of May, to over 2.2%, with much of the damage done by Bernanke’s surprise talk of QE tapering during the Q&A following his address to Congress’s Joint Economic Committee. US 30 year mortgage rates sold off…

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Time gentlemen please: the Fed prepares its exit from QE

The punch bowl of easy money that the US Federal Reserve has offered the market has been significant over the last 5 years: from low rates, to quantitative easing and benign regulation. The purpose of the party was to keep animal spirits high and prevent the gloomy cycle of recession from turning into depression. This generosity has been mirrored around the world in different guises, and so far…

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