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ESMA consults on derivatives clearing and trading obligations in view of the benchmarks transition
July 9, 2021--The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, today launches a consultation on the review of the regulatory technical standards (RTS) specifying classes of derivatives subject to the clearing (CO) and trading obligations (DTO).
The Consultation Paper examines the state of the transition away from EONIA and LIBOR, which will cease to exist, and onto alternative risk-free rates, such as €STR, SONIA and SOFR, in the OTC interest rate derivatives market.
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Source: ESMA
Lyxor Appoints Solactive Again for the Release of their Third Green Bond ETF, the Lyxor Euro Government Green Bond (DR) UCITS ETF
July 8, 2021-Climate change plays a significant role in our society for decades to come. Tackling rising temperatures is, therefore, not simply an environmental issue but also an economic necessity. According to the British non-profit Climate Bonds Initiative (CBI), financial professionals regard green bonds as one way to come to grips with climate change. In the first quarter of 2021, CBI reports the issuance of USD 106.86 billion in green bonds.
In 2020, the global issuance of green bonds exceeded the $1 trillion mark[1]. Building on this positive development, Green Bond pioneer Lyxor now released its new Lyxor Euro Government Green Bond (DR) UCITS ETF tracking the Solactive Euro Government Green Bond Index.
Both the attractivity and importance of green bond investing are undeniable. Between 2015 and 2020, the amount of green bond investing grew by a steady 60% per year, and the World Economic Forum expects the sum of global green bonds to achieve USD 2.36 trillion by 2023[2].
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Source: Solactive AG
Brussels to push for greater ETF trade transparency
July 8, 2021--Brussels will submit proposals to increase transparency and reduce the cost of market data with the aim of increasing the competitiveness of the EU exchange-traded fund industry.
Tillman Luder, head of the European Commission's securities markets division, said Brussels is currently discussing the development of integrated tapes with data providers.
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Source: FT.com
UK and Brussels clash over 40bn pound Brexit divorce bill-FT
June 8, 2021--In a latest Brexit update, published early Friday morning in Asia, the Financial Times (FT) said, "Brussels and London were on Thursday locked in a dispute over the size of the UK's Brexit bill, after the EU suggested that Britain would be obliged to pay€47.5bn (£40.8bn) as part of its post-Brexit arrangements."
"But the UK Treasury insisted that the Brexit divorce settlement remained within its previous central range of £35bn-£39bn. An updated estimate is to be published next week," added FT.
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Source: FT.com
The risks from climate change to sovereign debt in Europe
July 8, 2021--European Union institutions and national fiscal authorities should incorporate climate risk in debt sustainability analysis.
The exposure of European Union sovereigns to climate risks can be acute, from extreme weather, or chronic, from the productivity effects of gradual temperature increase, increased sea levels and the transition to a low-carbon economy that results in repricing of assets.
Climate-related innovations can also spur growth. These risks are priced by investors and can affect sovereign credit ratings.
Governments and fiscal stability authorities have an interest in the sovereign-debt implications of climate change being transparent.
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Source: bruegel.org/
ECB Unveils Policy Regime Change That Lets Inflation Overshoot
July 8, 2021--The European Central Bank raised its goal for inflation and may let it overshoot the target for a while, giving officials more discretion in how to bolster the economy after years of lackluster performance.
In the culmination of an 18-month review published Thursday, policy makers agreed to seek consumer-price growth of 2% over the medium-term with a "symmetric" aim.
The ECB said that when interest rates are close to their lower limit, as now, the economy will need "especially forceful" monetary stimulus that could "imply a transitory period in which inflation is moderately above target."
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Source: finance.yahoo.com
How have the European Central Bank's negative rates been passed on?
July 7, 2021--Negative rate cuts are not that different from 'standard' rate cuts. Like them, they reduce banks' margins, but this effect does not appear to be amplified below 0%.
Since the global financial crisis, several central banks have deployed negative policy rates, after exhausting conventional easing measures.
The European Central Bank introduced its negative interest rate policy (NIRP) in June 2014 when it cut its deposit facility rate below 0% for the first time, to -0.1%. Since then, the rate has been cut four more times, by 10 basis points each time, to reach -0.5% in September 2019. After seven years of NIRP and with markets currently expecting rates to stay negative for the next five years, it is crucial to fully understand the effects of prolonged negative rates on the economy.
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Source: bruegel.org
A new investment trust to profit from the space race
July 6, 2021--There is now an investment trust focusing on the space sector. It looks intriguing, says David Stevenson-but highly risky.
I recently highlighted the launch of a new exchange-traded fund (ETF) in the space sector: the Procure Space UCITS ETF (LSE: YODA).
Now comes news of another new fund in the same area, an actively managed investment trust called the Seraphim Space Investment Trust (LSE: SSIT). It is set for an initial public offering (IPO) worth £180m. The closing date for applications is Friday 9 July, with dealing commencing on Wednesday 14 July. The fund is targeting a net-asset-value (NAV) total return of at least 20% a year.
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Source: moneyweek.com
New law opens gates for institutional crypto investment in Germany
July 5, 2021--The German Bundesrat has approved a new piece of legislation -The Fund Location Act-which aims to regulate emerging asset classes for Germany's finance industry, including crypto assets such as Bitcoin (BTC).
The new law was first proposed and approved in the Bundestag (the lower house in Germany's parliament system) back in April, and with the recent approval in the Bundesrat the bill passed into law yesterday.
The specifics of the bill grant spezialfonds (special wealth management funds) the legal ability to allocate as much as 20% of their portfolio into crypto assets.
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Source: finance.yahoo.com
Euro area quarterly balance of payments and international investment position:
first quarter of 2021
July 5, 2021--Current account surplus at €285 billion (2.5% of euro area GDP) in four quarters to first quarter of 2021, up from €247 billion (2.1% of GDP) a year earlier
Geographic counterparts: largest bilateral current account surpluses vis-a-vis United Kingdom (€157 billion) and United States (€68 billion), largest deficit vis-a-vis China (€78 billion).
International investment position showed net liabilities of €118 billion (1.0% of euro area GDP) at end of first quarter of 2021
Current account
The current account surplus of the euro area increased to €285 billion (2.5% of euro area GDP) in the four quarters to the first quarter of 2021, up from €247 billion (2.1% of GDP) a year earlier (see Table 1). This increase reflected larger surpluses for services (from €26 billion to €66 billion) and for goods (from €327 billion to €357 billion). These developments were partly offset by a decrease in the surplus for primary income (from €41 billion to €34 billion), and a larger deficit for secondary income, which increased from €147 billion to €172 billion.
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Source: ECB
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