Last week: the election, the abolition of physical money, and how Tesla’s new battery is going to change the world and save us from a future zombie apocalypse

Here are a few quick thoughts about things that happened last week.

First, the UK election and the failure of the opinion polls. Ahead of the General Election we met with several of the big opinion pollsters, and even ran a Bond Vigilantes x Politics event featuring Anthony Wells of YouGov. Without exception they highlighted how unusual it was that, whilst the Conservatives appeared to be neck …

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2015-05-blog-AD

Negative interest rates in European ABS

Negative interest rates have become increasingly prevalent in Europe owing to the expansionary monetary policy measures with a number of central banks implementing negative base rates (Switzerland, and Sweden). Two weeks ago 3 month Euribor, (the reference rate for the majority of Pan-European Asset-Backed Securities (ABS)), followed 1 month Euribor (largely the preserve of most European Auto A…

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Five reasons EM debt is attractive

The consensus view on the outlook for Emerging Market (EM) bonds is bearish. Many point to risks posed by a Fed rate hike, falling commodity prices, possible Grexit and a slowing China as reasons to reduce investment allocations to the asset class. However, there is a solid investment case for EM debt at this point in time for those willing to have a closer look.

Firstly, geopolitical events ap…

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Inflation Surprises – what’s driving the current increases in market- and survey-based indicators of inflation expectations?

(blog originally posted on www.bruegel.org)

Euro area consumer price inflation, as measured by the HICP, continues to undershoot the ECB’s target of “close to, but below 2%”, currently at -0.1% in March. While it is still too early to tell if the ECB QE programme launched on March 9 will manage to bring back inflation towards the target in the medium term, a look at market- and survey-based inf…

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15.04.16 blog RW

Greece, the currency vigilantes and the Expulso solution

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…

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What are index-linked corporate bonds telling us at the moment?

When in past years I have fielded calls from bankers faintly like Chad ‘Ace’ Jefferson III (A Brave New World: Zero Yield Corporate Bonds) requesting any potential interest in new index-linked corporate bond issues, I have often begun my feedback by pointing to an old maxim. This well-known dogma posits that an index-linked corporate bond should price 25 basis points or so wider than a comparab…

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Explaining the collapse in global inflation rates – step forward China

We’ve been worried for years about the prospect of a sharp slowdown in China and the knock on implications for those countries and companies that have grown reliant on a strong China over the last decade, namely commodity exporters, some emerging markets, and particularly emerging market commodity exporters (eg see If China’s economy rebalances and growth slows, as it surely must, then who’s sc…

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Competition winners for Richard Koo’s book: 10 copies of The Escape from Balance Sheet Recession and the QE Trap

Richard Koo popped by our office a few weeks ago to discuss his most recent book The Escape from Balance Sheet recession and the QE Trap.  You can see the interview here.  We asked who was the Japanese prime minister in 1997 who oversaw arguably Japan’s biggest policy error post the collapse of Japan’s debt fuelled bubble, and the answer was Ryutaro Hashimoto.

It is perhaps a little harsh to im…

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Tweet inflation survey March 15

The M&G YouGov Inflation Expectations Survey – Q1 2015

Economic policy hawks love inflation expectation surveys. As do bond fund managers, who like to keep a close eye on inflation to ensure that fixed income returns aren’t being eroded away. Provided that inflation expectations are close to target, we tend to argue expectations are well anchored and thus central bankers can rest easy. However, the monetary policy actions undertaken by many central…

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The improvement in the US jobs market is quantitatively huge – but qualitatively mediocre

The condition of the US labour market is one of the hot topics in the ongoing “will they / won’t they” Fed rate hiking debate, and as Bloomberg’s Economic Surprises screen shows, this sector is the only area of the economy outperforming expectations of late.

Labour market indicators continue to impress, with employment indicators strong on many measures. Initial Jobless Claims have dropped to …

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