The tipping point in the Japanese government bond market
Low government bond yields (0.76% for 10-year maturity at present) allow Japan to preserve debt sustainability despite a gross debt-to-GDP ratio of over 220%....
Solvency issues of European insurances
The latest ECB’s financial stability report has a short but insightful section on the position of the EU insurance sector. While financial positions according to...
U.S. Fed: Why replacement of “operation twist” with outright bond purchases makes a difference
JP Morgan’s Nikolaos Panigirtzoglou presented a nice reasoning, why the December 12 2012 U.S. Fed decision to replace its maturity extension program with outright bond...
Why is volatility so low while uncertainty is still so high?
This note from Claudio Irigoyen and others supports the notion that implied volatilities naturally return to long-term trend even if economic uncertainty does not....
BIS re-interpretation of TARGET2 (im-)balances
In an easily readable working paper Stephen Cecchetti and colleagues explain the connection between euro area break-up concerns, Target2 balances, and financial conditions. This...
On collateral chains
A new IMF paper investigates the role of shadow banks in securitization and collateral intermediation. One important forward-looking concern is the potential vulnerability of...
Functions and risks of shadow banking
Shadow banking encompasses credit intermediation outside the regulated banking system, mostly through investment funds, money market funds, structured finance vehicles, broker-dealers, and finance companies....
A review of euro area bank deleveraging
Since 2008, Bank delevering has been on of the key drivers of the euro areas poor economic performance and its vulnerability to recurrent financial...
History of public debt reduction
In its October 2012 World Economic Outlook the IMF presented a 135-year study on public debt reduction strategies. It points out that debt stocks...
Consequences of euro area break-up fears
A very interesting Banca d’Italia study shows how euro area break-up expectations are becoming self-reinforcing, i.e. precipitating a divergence of sovereign yields and financial conditions beyond...
RECENT ARTICLES
Inflation as equity trading signal
Academic research suggests that high and rising consumer price inflation puts upward pressure on real discount rates and is a headwind for equity market...
Economic growth and FX forward returns
Economic growth differentials are plausible predictors of foreign exchange return trends because they are related to differences in monetary policy and return on investment....
How to use FX carry in trading strategies
FX forward-implied carry is a valid basis for trading strategies because it is related to divergences in monetary and financial conditions. However, nominal carry...