Global ETF News Older than One Year
Public Debt in Advanced Economies and its Spillover Effects on Long-term Yields-IMF Working paper
August 30, 2011--Summary: Several models establish a positive association between public debt ratios and long-term real yields, but the empirical evidence is not always conclusive. We reconsider this issue, focusing in particular on possible spillover effects of large advanced economies’ debt levels to other economies’ borrowing yields, especially in emerging markets.
We extend the existing literature by using real time expectations of fiscal and other macroeconomic variables for a large sample of advanced and emerging economies. We show that an increase in the public debt levels of large advanced economies - especially the United States - spills over to both emerging markets and other advanced economies’ long-term real yields and that this effect is significant at the current levels of advanced economies’ debt ratios.
Source: IMF
Institutional investors turning to private equity as source of alpha
August 31, 2011--Institutional investors are turning to private equity as a source of alpha at a time when low returns are expected for several asset classes in the current financial context.
According to a survey by SEI and Greenwich Associates, institutional investors are keen to increase their allocation to private equity but are asking fund managers to improve reporting and risk-management measures.
Source: IP&E
Communication of Central Bank Thinking and Inflation Dynamics
August 29, 2011--Summary: This paper studies the role of central bank communication of its economic assessment in shaping inflation dynamics. Imperfect information about the central bank’s assessment - or the basis for monetary policy decisions - could complicate the private sector’s learning about its policy response function.
We show how clear central bank communication, which facilitates agents’ understanding of policy reasoning, could bring about less volatile inflation and interest rate dynamics, and afford the authorities with greater policy flexibility. We then estimate a simple monetary model to fit the Mexican economy, and use the suggested paramters to illustrate the model’s quantitative implications in scenarios where the timing, nature and persistence of shocks are uncertain.
view IMF paper-Communication of Central Bank Thinking and Inflation Dynamics
Source: IMF
ETF Securities-Research Update-CME Hikes Gold Futures Margins Another 27% - What Does it Mean for the Gold Price?
August 26, 2011--Summary:
The CME raised margin requirements on COMEX gold futures positions by 27%, effective at the end of trade
on 25 August. The margin increase is the second in two weeks, coming on top of a 22% hike on 11 August 2011.
The margin hikes have been compared to the five consecutive silver futures margin hikes in May 2011 that was viewed as helping to precipitate a nearly 30% fall in the silver price during that month. Below we take a closer look at the current situation, building on our last report released on 12 August 2011 and assess the likelihood of a similar situation developing for gold.
Key points:
The CME increased margin requirements on US gold futures positions by 27% yesterday, the second
increase in two weeks. There are some concerns that the current situation may be directly comparable to
the 84% increase in COMEX silver futures margins in May that helped drive a nearly 30% decline in the silver
price. Including yesterday’s hike, COMEX gold margin requirements will have increased 56% in two weeks.
Further margin hikes cannot be ruled out. It has to be remembered that the CME is not targeting a lower gold price, but ensuring its counterparty risk is covered to reflect higher price volatility. When price volatility falls, margins will also fall. On our calculations, based on the historical relationship between gold price volatility and COMEX margin requirements as a percent of the gold price, there is possibly another 10-25% of margin hikes ahead. This would bring total margin increases from June levels to around 65-80%. This is estimated using a base case of the gold price and gold price volatility remaining near current levels and that the historic relationship between gold margins and gold price volatility remain the same. These variables of course have the potential to move quite quickly so there is a relatively large margin of error around these estimates.
visit www.etfsecurities.com for more info
Source: ETF Securities
Emerging market private equity deals rise in H1
August 26, 2011-Global emerging market private equity deal volume rose by 11 percent to $14.1 billion in the first half of 2011, and fundraising doubled to $22.6 billion, the Emerging Markets Private Equity Association said on Thursday.
Emerging market private equity deals dropped sharply during the global financial crisis, totalling $28.8 billion in 2010 compared with $47.8 billion in 2008, the association said in a statement.
Source: Reuters
The Taxation and Regulation of Banks -IMF Working paper
August 25, 2011--Summary: The financial crisis has prompted a reconsideration of the taxation of financial institutions, with practice outstripping principle: France, Germany, the United Kingdom and several other European countries have now introduced some form of bank tax, and the U.S. administration has revived its own proposal for such a charge. This paper considers the structure, appropriate rate, and revenue yield of corrective taxation of financial institutions addressed to two externalities,
consequent on excessive risk-taking, prominent in the crisis: those that arise when such institutions are simply allowed to collapse, and those that arise when, to avoid the harm this would cause, their creditors are bailed out. It also asks whether corrective taxation or a regulatory capital requirement is the better way to address these concerns. The results suggest a potential role for taxing bank borrowing, perhaps as an adjunct to minimum capital requirements, at marginal rates that rise quite sharply at low capital ratios (but are likely lower when the government cannot commit to its bailout policy), reaching levels higher than those of the bank taxes so far adopted or proposed.
view IMF Working paper-The Taxation and Regulation of Banks
Source: IMF
US funds show true state of eurozone banks
August 25, 2011--In any murder mystery film, it pays to watch the boring grey man (or woman) in the corner; quiet, unobtrusive characters can be deadly.
So, too, in finance. Four years ago, the giant US money market funds seemed some of the dullest actors in the global financial scene. But in 2007, they quietly helped to spark the crisis in the mortgage-backed securities world, when they silently stopped rolling over bonds. Then, in 2008, they furtively wielded the knife again, pulling funding from some American banks and the “repo” – repurchase – markets.
Source: FT.com
Gold drops $160 an ounce in two days
August 24, 2011--Gold suffered its largest two-day absolute fall in more than three decades, dropping $160 per ounce between Tuesday and Wednesday in a move that spotlighted the dangers of an asset viewed as a haven.
Investors risked further sharp moves as the leading US metals exchange announced it will demand larger good-faith deposits to own gold futures starting after Thursday’s close.
Source: FTcom
CPSS-IOSCO releases report on requirements for OTC derivatives data reporting and aggregation
August 24, 2011--The Committee on Payment and Settlement Systems and the Technical Committee of IOSCO have today released for comment a report on the OTC derivatives data that should be collected, stored and disseminated by trade repositories (TRs).
The committees support the view that TRs, by collecting such data centrally, would provide the authorities and the public with better and timely information. This would make markets more transparent, help to prevent market abuse, and promote financial stability.
The report addresses Recommendation 19 in the October 2010 report of the Financial Stability Board (FSB), Implementing OTC derivatives market reforms, which called on the CPSS and IOSCO to consult with the authorities and the OTC Derivatives Regulators Forum in developing:
1.minimum data reporting requirements and standardised formats, and
2.the methodology and mechanism for data aggregation on a global basis. A final report is due by the end of 2011.
Report on OTC derivatives data reporting and aggregation requirements- consultative report
Source: BIS
OPEC-Monthly Oil Market Report-Auust 2011
August 24, 2011--Oil Market Highlights
The OPEC Reference Basket moved within a narrower range of $106.5-$113.6/b in July as market volatility diminished. After having lost a total of more than $9 in May and June, the Basket posted a monthly gain of $2.58 or 2.4%, to stand at $111.62/b.
Futures prices also recovered early in July, on the back of a weaker US dollar and improving macroeconomic sentiment. However, the gains were short lived as prices plunged in the first week of August with both Nymex WTI and ICE Brent falling to a five-month low on deteriorating macroeconomic sentiment due to Euro-zone debt concerns and the slowdown in the US economy. The Basket stood at $102.37/b on 8 August.
World economic growth has been revised down to 3.7% in 2011 and to 4.0% in 2012. This was mainly due to revisions in the US forecast, which was cut to 1.8% from 2.5% in 2011 and to 2.3% from 2.9% in 2012. The forecast for Japan and the Euro-zone remained unchanged in 2011 at minus 0.8% and 2.0% respectively. Japan’s forecast for 2012 remained at 2.5%, while the Eurozone’s forecast was changed to 1.4% from 1.5% previously. Developing Asian countries continue to be the main drivers of growth. The forecasts for China remain unchanged at 9.0% in 2011 and 8.5% in 2012. India’s forecast for 2011 was revised down from 8.1% to 7.9%, while the forecast for 2012 was unchanged at 7.7%.
World oil demand is forecast to grow by 1.2 mb/d in 2011, representing a downward revision of 0.15 mb/d. Economic worries have affected OECD oil demand, leading to weaker-than-expected consumption during the summer driving season. Oil demand in the OECD is expected to continue its contraction after a temporary rebound last year. In 2012, world oil demand is forecast to reach 1.3 mb/d, representing a slight downward revision from the previous report.
Source: OPEC
