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Financing the European Union: New Context, New Responses
September 11, 2020-With the European Union for the first time taking on debt to help finance the economic recovery from the coronavirus, new resources are needed to fund the EU budget. Various ideas have been floated-including a digital tax and a financial transactions tax-but the most appropriate new resource would be revenues from the EU emissions trading system, which could provide enough funding to repay the EU's coronavirus borrowing.
Roughly two thirds of the European Union's budget is financed out of member states' national tax revenues. These resources, based on gross national incomes, are transparent, fair and in line with the principle of subsidiarity but they lead to political debates that emphasise the cost of EU spending rather than the benefits, and add to the perception of the EU budget in terms of net balances, rather than value added.
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Source: bruegel.org
ECB-Euro area securities issues statistics: July 2020
September 10, 2020--The annual growth rate of the outstanding amount of debt securities issued by euro area residents was 7.3% in July 2020, compared with 7.2% in June.
For the outstanding amount of listed shares issued by euro area residents, the annual growth rate was 0.1% in July 2020, compared with 0.0% in June.
Debt securities
New issuance of debt securities by euro area residents totalled EUR 773.2 billion in July 2020. Redemptions amounted to EUR 698.8 billion and net issues to EUR 74.5 billion. The annual growth rate of outstanding debt securities issued by euro area residents was 7.3% in July 2020, compared with 7.2% in June.
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Source: ECB
Investors see lower net returns from potential closet index funds
September 9, 2020--The European Securities and Markets Authority (ESMA), the EU securities markets regulator, today publishes a Working Paper on Closet Indexing Indicators and Investor Outcomes.
The study finds that investors can expect lower net returns from closet indexers than from a genuinely actively managed fund portfolio. A summary of this study was also included in the Trends, Risks and Vulnerabilities report published on 2 September.
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Source: ESMA
New Tabula ETF on Xetra: US and European investment grade credit default swaps
September 9, 2020--Since Wednesday, a new Exchange Traded Fund issued by Tabula is tradable on Xetra and Börse Frankfurt.
The Tabula Global IG Credit Curve Steepener UCITS ETF (EUR) Acc gives investors the opportunity to invest in credit default swaps with investment grade rating from Europe (iTraxx Index) and the USA (CDX IG Index).
Both the iTraxx Europe and the CDX IG Index each contain 125 credit default swaps (CDS). In order to benefit from a steeper credit curve, a long position is opened in the most recently issued five-year CDS and a short position in the most recently issued ten-year CDS. In order to maintain the current CDSs at all times, the indices are reviewed on a monthly basis.
Credit default swaps are instruments through which banks in particular pass on the default risk of their borrowers to third parties, so-called guarantors. The guarantors receive a premium for this. In return, they commit to make a compensation payment to the bank if the borrower is in arrears with his payments or defaults.
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Source: Deutsche Börse
Climate finance: an agenda for EU coordination with emerging markets
September 9, 2020-Addressing the challenge of financing the low-carbon transition will require substantial investment in the European Union and in emerging and developing economies. Sustainable finance frameworks have proliferated in advanced and emerging markets but fragmentation of financial flows due to different classification systems and standards for green financial instruments is a real risk.
Ensuring consistency should be a core agenda for the new International Platform on Sustainable Finance.
Estimates suggest that about 70% of the infrastructure investment needed for the low-carbon transition will have to be deployed in the emerging markets and developing economies (EMDEs). Countries’ updated nationally determined commitments, which are due ahead of the COP-26 UN climate summit in 2021, will underline the scale of this challenge. They are bound to highlight considerable financing shortfalls as resources from national budgets and development funds will be scarce in the aftermath of the current recession.
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Source: bruegel.org
New UBS ETF on Xetra: Currency-hedged sustainable corporate bonds worldwide
September 8, 2020--Since Tuesday, a new Exchange Traded Fund issued by UBS Global Asset Management has been tradable on Xetra and Börse Frankfurt.
The UBS ETF- Bloomberg Barclays MSCI Global Liquid Corporates Sustainable UCITS ETF (hedged to EUR) A-acc enables investors to participate in the performance of fixed income corporate bonds with an investment grade rating.
The bonds from the USA, Canada, the euro zone and the UK are issued in local currency and take sustainability criteria into account. To be included in the index, the bonds must have a remaining maturity of at least one year and must have been issued in the last three to five years. The exchange rate risk against the euro is minimized and accruing coupon payments are reinvested.
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Source: Deutsche Börse
EU restarts probe into London Stock Exchange-Refinitiv merger
September 8, 2020--The European Commission has restarted an investigation into the $27bn (£s;20bn) merger between the London Stock Exchange Group and information provider Refinitiv, with a result expected by 16 December.
The investigation into the tie-up, which kicked off in June, was halted in July while the Commission waited for the pair to provide information that it had requested.
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Source: fnlondon.com
ESMA Newsletter-No. 16
September 7, 2020--During July and August, ESMA has launched an assessment of the German financial reporting system following the Wirecard collapse, published the results of its third EU- wide CCP stress test and proposed members for its CCP directorate.
In this edition, we will also take a closer look at our full list of ESMA webinars and catch up on publications from the summer months.
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Source: ESMA
Economists stick to Brexit forecasts despite no-deal rhetoric
September 7, 2020--Economists stuck to their forecasts on Monday that Britain and the European Union would agree some sort of post-Brexit trade deal, taking the view that London is likely toughening its rhetoric in a bid to pressure Brussels into a compromise.
The talks are back in crisis and the pound is bearing the brunt on renewed fears of a disorderly exit from the EU after the British government was reported to be planning legislation to override parts of the Withdrawal Agreement it signed in January.
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Source: reuters.com
ESMA Provides for the Option to Apply the Annual Transparency Calculations for Non-equity Instruments From 21 September
September 7, 2020--The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, has today decided that trading venues and investment firms may postpone, for operational reasons, the application of the annual transparency calculations for non-equity instruments other than bonds to 21 September 2020.
This decision also applies to the quarterly calculations for the purpose of the systematic internaliser (SI) regime for non-equity instruments other than bonds.
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Source: ESMA
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