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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R tidyverse for macro trading research

The tidyverse is a collection of packages that facilitate data science with R. It is particularly powerful for macro trading research because it...

Nowcasting with MIDAS regressions

Nowcasting macro-financial indicators requires combining low-frequency and high-frequency time series. Mixed data sampling (MIDAS) regressions explain a low-frequency variable based on high-frequency variables and...

Market-implied macro shocks

Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro news. The methodology is structural vector autoregression. Theoretical ‘restrictions’...

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