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Bond ETF inflows slump to lowest level since start of pandemic
December 17, 2021--Fixed income ETFs attracted global net inflows of just $14bn in November on inflation fears
Bond ETFs saw global net inflows of just $14bn in November, according to data from BlackRock's iShares arm, the weakest reading since March 2020
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IMF-Drivers of Emerging Market Bond Flows and Prices
December 16, 2021--Summary:
An interesting disconnect has taken shape between local currency-and hard currency-denominated bonds in emerging markets with respect to their portfolio flows and prices since the start of the recovery from the COVID-19 pandemic. Emerging market assets have recovered sharply from the COVID-19 sell-off in 2020, but the post-pandemic recovery in 2021 has been highly uneven.
This note seeks to answer why. Yields of local currency-denominated bonds have risen faster and are approaching their pandemic highs, while hard currency bond yields are still near their post-pandemic lows.
Portfolio flows to local currency debt have similarly lagged flows to hard currency bonds. This disconnect is closely linked to the external environment and fiscal and inflationary pressures. Its evolution remains a key consideration for policymakers and investors, since local markets are the main source of funding for emerging markets. This note draws from the methodology developed in earlier Global Financial Stability Reports on fundamentals-based asset valuation models for funding costs and forecasting models for capital flows (using the at-risk framework). The results are consistent across models, indicating that local currency assets are significantly more sensitive to domestic fundamentals while hard currency assets are dependent on the external risk sentiment to a greater extent. This suggests that the post-pandemic, stressed domestic fundamentals have weighed on local currency bonds, partially offsetting the boost from supportive global risk sentiment. The analysis also highlights the risks emerging markets face from an asynchronous recovery and weak domestic fundamentals.
IMF-Multi-Sector Bond Funds in Emerging Markets-Easy Come, Easy Go
December 16, 2021--Summary:
Unconstrained multi-sector bond funds (MSBFs) can be a source of spillovers to emerging markets and potentially exert a sizable impact on cross-border flows. MSBFs have grown their investment in emerging markets in recent years and are highly concentrated-both in their positions and their decision-making.
They typically also exhibit opportunistic behavior much more so than other investment funds. Theoretically, their size, multisector mandate, and unconstrained nature allows MSBFs to be a source of financial stability in periods of wide-spread market turmoil while others sell at fire-sale prices.
However, this note, building on the analysis of Cortes and Sanfilippo (2020) and incorporating data around the COVID-19 crisis, finds that MSBFs could have contributed to increase market stress in selected emerging markets. When faced with large investor redemptions during the crisis, our sample of MSBFs chose to rebalance their portfolios in a concentrated manner, raising a large proportion of cash in a few specific local currency bond markets. This may have contributed to exacerbating the relative underperformance of these local currency bond markets to broader emerging market indices.
2021: The Year in Climate in 5 Numbers
December 16, 2021--5X--The order of magnitude by which climate change is making intense heat waves more likely
"Since 1850, the earth has warmed by 1 degree Celsius. It looks small, but it's enough to multiply by 5 the frequency of extreme heat waves: what used to be an exceptional heat wave happening once every 50 years, now happens every 10 years," says World Bank Senior Climate Advisor, Stéphane Hallegatte.
What may the future hold? Dive into the data with Hallegatte.
216-million --The number of people who could migrate within their own countries by 2050 because of climate change
New research by the World Bank projects that millions of people could be on the move in the next decades, leaving places that can no longer sustain them and going to areas that offer better opportunities. But Groundswell finds that the world's collective actions taken today to lower greenhouse gas emissions and help people adapt could reduce future internal climate migration by as much as 80%.
5 Key Issues in Agriculture in 2021
December 16, 2021-As 2021 ends, we take a retrospective look at five topics that were covered in our analytical work this year. These issues represent just a fragment of the Bank's work, but they are key to reducing poverty and hunger while slowing climate change.
Food Security
Like the previous year, news in agriculture and food in 2021 was dominated by deteriorating food security. Approximately 30 percent of the world’s population lacked access to adequate food in 2020 and into 2021.
Farming Insects for Food and Feed
This December, the Bank released a ground-breaking report looking at the valuable role farming insects can play in both food security and climate-smart agriculture, Insect and Hydroponic Farming in Africa: The New Circular Food Economy.
Making Electronic Money Safer in the Digital Age
December 14, 2021-As e-money use grows, regulators need to focus on consumer protection and the integrity of the overall payments system.
Imagine you go to pay for your morning coffee and your stored-value card returns an error message, or the wallet in the payments app on your phone isn't opening because the company providing the payment service has gone bankrupt. Worse, what if you live in a rural area and the e-money service provided through your mobile phone was the only access you have to the financial system? Or your government now relies on the e-money system to transfer benefits or collect taxes on a large scale?
Digital forms of money-including central bank digital currencies, privately issued stable coins, and e-money-continue to evolve and find new ways to become more integral in people's day-to-day lives. In essence e-money is a digital representation of fiat currency guaranteed by its issuer. Customers exchange regular money into e-money, which they can use to make payments through an app on their cellphone to individuals and businesses alike with ease and immediate effect.
Metals Demand From Energy Transition May Top Current Global Supply
December 8, 2021--Firm, market, and country level factors may weigh on metals production under a net-zero scenario.
The clean energy transition needed to avoid the worst effects of climate change could unleash unprecedented metals demand in coming decades, requiring as much as 3 billion tons.
A typical electric vehicle battery pack, for example, needs around 8 kilograms (18 pounds) of lithium, 35 kilograms of nickel, 20 kilograms of manganese and 14 kilograms of cobalt, while charging stations require substantial amounts of copper. For green power, solar panels use large quantities of copper, silicon, silver and zinc, while wind turbines require iron ore, copper, and aluminum.
World Inequality Report 2022
December 7, 2021--The World Inequality Report 2022 presents the most up-to-date and complete data on the various facets of inequality worldwide as of 2021: global wealth, income, gender and ecological inequality. The analysis is based on several years' work by more than one hundred researchers from around the world, and will be published by the World Inequality Lab.
The data is available in the most complete database on economic inequality, the World Inequality Database. The report includes a foreword by 2019 economic Nobel prize laureates Abhijit Banerjee & Esther Duflo.
In a nutshell
In 2021, after three decades of trade and financial globalization, global inequalities remain extremely pronounced: they are about as great today as they were at the peak of Western imperialism in the early 20th century. In addition, the Covid pandemic has exacerbated even more global inequalities. Our data shows that the top 1% took 38% of all additional wealth accumulated since the mid-1990s, with an acceleration since 2020. More generally speaking, wealth inequality remains at extreme levels in all regions
Addressing Inflation Pressures Amid an Enduring Pandemic
December 3, 2021--With inflationary pressures intensifying and Omicron generating new uncertainties, monetary policymakers are facing new and challenging tradeoffs.
The resurgence of the pandemic and the latest variant, Omicron, have sharply increased uncertainty around global economic prospects. This comes as several countries grapple with inflation well above their monetary policy targets.
It is however evident that the strength of the economic recovery and magnitude of underlying inflationary pressures vary significantly across countries.Accordingly, policy responses to rising prices must be calibrated to the unique circumstances of individual economies.
We see grounds for monetary policy in the United States-with gross domestic product close to pre-pandemic trends, tight labor markets, and now broad-based inflationary pressures-to place greater weight on inflation risks as compared to some other advanced economies including the euro area. It would be appropriate for the Federal Reserve to accelerate the taper of asset purchases and bring forward the path for policy rate increases.
Sovereign Domestic Debt Restructuring: Handle with Care
December 1, 2021--Restructuring domestic debt is like surgery: You only do it if you must, and you avoid it if it might do more harm than good.
With rising debt vulnerabilities and growing stocks of sovereign domestic debt in emerging and developing economies, the questions of when and how to restructure such debt are now more acute than ever.
Over the past two decades, emerging market developing economies have seen their share of sovereign domestic debt-let's call it "domestic debt" for short-increase from 31 to 46 percent of their total sovereign debt.
Thus, restructuring of domestic debt is likely to play a role in the resolution of future debt crises. A new IMF paper draws on the past 40 years of sovereign debt restructurings to offer some insights into the key considerations for a domestic debt restructuring that restores debt sustainability while minimizing the disruption caused.
