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Budget 2012: will 100-year bonds work?
March 14, 2012--The chancellor is considering issue long-term government bonds-packages of government debt-that may never have to be paid off in what his aides have described as a move to cash in on the current historically low interest rates on British government debt.
This is from the top of my colleague Nick Watt's story about the announcement:
George Osborne is to exploit Britain's historically low borrowing rates by making plans to issue "perpetual" government bonds which will never have to be repaid. In an unprecedented move in the modern era, the chancellor will unveil plans in the budget to relieve the debt burden on future generations by extending the length of bonds to 100 years or into perpetuity.
Lengthening the period of bonds will make it cheaper to pay down debt in the long term because the government would lock in today's low borrowing rates. Average 10-year gilt yields stand at 2%, the lowest borrowing level since the 19th century.
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Source: The Guardian
Eurozone official inflation at 2.7% in February
March 14, 2012--Euro area1 annual inflation was 2.7% in February 20122, unchanged compared with January3. A year earlier the rate was 2.4%. Monthly inflation was 0.5% in February 2012.
EU4 annual inflation was 3.0% in February 2012, up from 2.9% in January. A year earlier the rate was 2.9%. Monthly inflation was 0.5% in February 2012.
These figures come from Eurostat, the statistical office of the European Union.
Inflation in the EU Member States
In February 2012, the lowest annual rates were observed in Sweden (1.0%), Greece (1.7%) and Spain (1.9%), and the highest in Hungary (5.8%), Estonia and Poland (both 4.4%). Compared with January 2012, annual inflation fell in nine Member States, remained stable in five and rose in eleven.
The lowest 12 month averages5 up to February 2012 were registered in Sweden (1.3%), Slovenia (2.1%) and Malta (2.3%), and the highest in Romania (5.1%) and Estonia (5.0%).
Euro area
The main components with the highest annual rates in February 2012 were transport (4.6%), housing (4.4%) and alcohol & tobacco (4.1%), while the lowest annual rates were observed for communications (-3.0%), recreation & culture (0.9%) and education (1.0%). Concerning the detailed sub-indices, fuels for transport (+0.38 percentage points), gas and heating oil (+0.14 each) had the largest upward impacts on the headline rate, while telecommunications (-0.19), cars (-0.09) and rents (-0.08) had the biggest downward impacts.
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Source: Eurostat
Russian Federation: Detailed Assessment of Observance of IOSCO Objectives and Principles of Securities Regulation
March 13, 2012--I. SUMMARY, KEY FINDINGS, AND RECOMMENDATIONS
1. This assessment reviews the regulatory framework in place for the oversight of
the capital markets of the Russian Federation as of June 2011. The assessment concludes that, since the previous assessment, the regulatory authority for the capital markets, which is the Federal Service for Financial Markets (FSFM), has led the adoption of significant reforms in applicable legislation and undertaken ambitious normative (regulatory) initiatives directed to meeting the IOSCO benchmarks for which the process of implementation is ongoing.
The assessment also finds that FSFM’s ability to come into full compliance would be materially advanced by the adoption of pending legislation related to exchanges, prudential supervision, bank secrecy, and consolidated supervision. The FSFM absorbed the
Federal Service on Insurance Supervision (FSIS) as of March 4, 2011. Subsequent changes added certain other non-banking financial institutions to FSFM’s remit and will transfer
certain of its normative powers with respect to capital requirements for market professionals
and the diversification of mutual fund assets to the Ministry of Finance (MoF).
Navesis-ETF platform moves into Emerging Markets
After successful launch, Navesis-ETF, the ETF trading platform by Tradition and Nomura, expands into Emerging Markets Products
March 13, 2012- Following the successful launch of Navesis-ETF, the MTF for trading ETFs referencing NAV, Tradition and Nomura today announced the listing of 35 new Emerging Markets ETFs on to the platform.
These additions significantly enhance the depth and range of markets that can be accessed through the platform. The additions address requests received from the Navesis customer base, epitomising the continued philosophy of a platform developed to fulfil the desires of market participants. Further product and issuer additions are planned.
Since Navesis-ETF's successful launch in February this year, the platform now lists almost 200 ETFs, covering Equities, Commodities, Fixed Income and Emerging Markets. Most of the core customer base have signed up and work is in progress to add several more market makers to the platform. New functionality enhancements are constantly being made, incorporating client feedback.
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Source: Navese
Top Russian CEO says doubt affecting fund industry's growth
March 13, 2012--One of Russia's leading fund managers Alexander Pugach, CEO of UralSib Asset Management, reveals what are the main factors likely to impact the Russian fund industry over the next few years.
In this exclusive Citywire interview at his offices in Moscow, he outlines his vision of the future, discussing how asset managers will need to adapt their business models to be confident of growth in the next few years and who will be the winners and the losers.
Following the Russian asset management sector's near collapse after the 2008 crisis, with the Moscow stock market suffering a severe drop and many Russian investors withdrawing their cash from asset managers, Pugach reveals whether he expects to see more such systemic crises and what is the best way to tackle them.
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Source: CityWire
Publication of responses to the consultation on Delegated Acts concerning short selling and CDS
March 13, 2012--The Publication of responses to the consultation on Delegated Acts concerning short selling and CDS is now available.
view responses
Source: EDHEC
New EDHEC-Risk Research Sees No Evidence of Causal Link between Credit Default Swap (CDS) and Sovereign Debt Prices
In newly-released research by Dominic O'Kane, Affiliated Professor of Finance at EDHEC Business School, EDHEC-Risk Institute has performed a theoretical and empirical analysis of the relationship between the price of eurozone sovereign-linked credit default swaps (CDS) and the same sovereign bond markets during the eurozone debt crisis of 2009-2011.
March 13, 2012--The working paper, entitled "The Link between Eurozone Sovereign Debt and CDS Prices," tests the claim that speculative use of CDS by market participants had caused or accelerated the rapid decline in 2010-11 of bond prices in eurozone periphery countries,
a claim that led to the decision by the European Parliament and member states on October 18, 2011, to make the ban on so-called "naked" CDS permanent.
The EDHEC-Risk research shows that CDS spreads do not drive the sovereign bond spread in all circumstances, and that in various countries and at various times, the opposite effect is present. The results are in line with those of a recent report from the French regulatory authority, the AMF, entitled “Price Formation on the CDS Market: Lessons of the Sovereign Debt Crisis (2010- ),” even though the latter study is less comprehensive than EDHEC-Risk’s working paper. EDHEC-Risk is keen to stress that certain conclusions in the AMF report should be analysed with care. A causal link between rising CDS spreads and their decision-making character has not been established or proven in the report, which moreover does not include a formal test on the subject.
view EDHEC-Risk Working Paper Link between Eurozone Sovereign Debt and CDS Prices report
Source: EDHEC
Disputed financial transactions tax crosses first EU hurdle
March 13, 2012--EU finance ministers gave a downbeat reaction Tuesday to plans for a cross-border tax on the finance industry, but agreed to discuss further a proposal stiffly resisted by Britain.
Four decades after US economist James Tobin came up with the idea, the French-led financial transactions tax (FTT) drive is aimed at raising revenues from financial firms after banks especially benefited heavily from taxpayer bailouts when the US mortgage meltdown triggered the 2008 global financial crisis.
The City of London is home to 80 percent of Europe's finance industry, and Britain expressed its view during the talks that the initiative as drawn up by the European Commission last year had "raised more questions than answers" to-date.
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Source: EUbusiness
Chinese diplomat sees airlines turning to Boeing over EU tax
March 12, 2012--A senior Chinese diplomat said it "makes sense" for Chinese airlines to shun aircraft made in Europe, owing to an EU tax on aircraft emissions, the Wall Street Journal reported on Monday.
The newspaper reported that the new Chinese ambassador to the European Union in Brussels Wu Hailong told reporters that a decision by the European Union to make non-European airlines subject to the tax "contributed to the current dilemma."
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Source: EUbusiness
March 2012 Quarterly Review discusses global market repercussions of euro area sovereign debt crisis
March 12, 2012--The BIS Quarterly Review for March 2012, released today, discusses global impact of European bank deleveraging. The March issue also provides highlights from the latest BIS data on international banking and financial activity.
In addition, it features three articles (more detailed abstracts follow):
1.The impact of Federal Reserve asset purchase programmes: another twist
2.FX volume during the financial crisis and now
3.Bank stock returns, leverage and the business cycle
\European bank funding and deleveraging
Following special policy measures introduced by central banks around the beginning of December, European banks' funding conditions improved. Previously, many banks had been unable to raise funds in the unsecured senior bond market, and the cost of unsecured money market funding had risen to levels previously exceeded only during the 2008 crisis. Dollar funding had become especially expensive. Two three-year lending operations (LTRO) by the ECB and a wider set of collateral than was previously eligible relieved much of the stress. Furthermore, the cost of swapping euros into dollars fell in December, as central banks reduced the costs of their international swap lines. Short-term borrowing costs then declined and unsecured bond issuance revived.
view the BIS Quarterly Review, March 2012
Source: BIS
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