The dollar as barometer for credit market risk

The external value of the USD has become a key factor of U.S. and global credit conditions. This reflects the surge in global USD-denominated...

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....

How regulatory reform shapes the financial cycle

Ambitious regulatory reform has changed the dynamics of the global financial system. Capital ratios of banks have increased significantly, reining in bank credit. Counter-cyclical...

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...

Understanding collateral runs

In normal financial runs lenders want their money back. In collateral runs borrowers want their collateral back. In today’s highly collateralized financial system the...

Modern financial system leverage

Leverage in modern financial systems arises from bank balance sheets and off-balance sheet transactions that involve banks and other financial institution. Non-bank funding of...

The consequences of increased financial collateralization

There has been a strong upward trend in collateralization since the great financial crisis. Suitable collateral, such as government bonds, is essential for financial...

How bank regulatory reform has changed macro trading

The great regulatory reform in global banking has altered the backdrop for macro trading. First, greater complexity and policymaker discretion means that investment managers...

Cash hoarding and market dynamics

Institutional asset managers can aggravate market swings due to the pro-cyclicality of redemptions, internal leverage and cash positions. A new empirical analysis shows that...

Volcker Rule and liquidity risk

The Volcker Rule has banned proprietary trading of banks with access to official backstops. Also, market making has become more onerous as restrictions and...

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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...

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