The world’s negative term premium

The term premium on the “world government bond yield” has turned decisively negative, according to BIS research. Investors have since 2014 accepted a long-term...

Tiered reserve systems

Negative monetary policy rates can undermine financial transmission, because they encourage cash hoarding and reduce the profitability of traditional banking. This danger increases with...

ECB asset purchases: the three transmission channels

A new paper suggests that ECB asset purchases influence markets and the economy significantly, mainly through three channels. First, through the asset valuation channel...

Collateral framework: risks and policies

The rising importance of high-quality collateral for financial transactions brings new systemic risks, such as potential collateral shortages and secured funding constraints in crisis times....

The evolution of China’s monetary policy

China’s economy has long relied on compressed interest rates in conjunction with strict capital controls and a tightly managed exchange rate. A new ADBI...

Low rates troubles for insurances and pension funds

A CGFS report highlights the pressure of a ‘low for long’ interest rate environment on life insurance companies and defined-benefit pension funds. This pressure...

The “de-anchoring” of inflation in the euro area

Two recent empirical studies highlight the risk that inflation expectations in the euro area are becoming de-anchored, similar to Japan. De-anchoring means that short-term price...

How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....

Japan’s yield curve control: the basics

The Bank of Japan has once again broken new grounds in monetary policy, now targeting not just the short-term policy rate but – within limits...

The duration extraction effect

Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The purchase of assets changes the structure of prices. A...

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Estimating the positioning of trend followers

There is a simple method of approximating trend follower positioning in real-time and without lag. It is based on normalized returns in liquid futures...

Forecasting energy markets with macro data

Recent academic papers illustrate how macroeconomic data support predictions of energy market flows and prices. Valid macro indicators include shipping costs, industrial production measures,...

Fundamental trend following

Fundamental trend following uses moving averages of past fundamental data, such as valuation metrics or economic indicators, to predict future fundamentals, analogously to the...

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