Global ETF News Older than One Year
Consumer Prices, OECD-Updated: 3 March 2021
March 3, 2021--OECD annual inflation picks up to 1.5% in January 2021 while Euro Area records sharp increase to 0.9%
Annual inflation in the OECD area picked up to 1.5% in January 2021, compared with 1.2% in December 2020.
Following a rebound between December and January, the annual decline in energy prices was less pronounced in January (minus 3.9%) than in December (minus 6.5%), while food price inflation slowed slightly to 3.1%, compared with 3.2% in December. OECD annual inflation excluding food and energy, also increased slightly, to 1.7% in January, compared with 1.6% in December.
Source: OECD
The Evidence Is in on Negative Interest Rate Policies
March 3, 2021--Interest rates are low, and "lower for longer" has become something of a mantra among policy makers, regulators, and other market watchers. But negative interest rates raise an entirely new set of questions.
After eight years of experience with negative interest rate policies, the initial skepticism (paying interest to borrowers rather than savers was certainly unprecedented) has proven largely misplaced.
The evidence so far suggests that negative interest policies have worked.
Since 2012, a number of central banks introduced negative interest rate policies. Central banks in Denmark, euro area, Japan, Sweden, and Switzerland turned to such policies in response to persistently below-target inflation rates (most central banks set rates as part of their broader mandate to keep prices stable, thereby supporting jobs and economic growth).
view the IMF Departmental Paper-Negative Interest Rates : Taking Stock of the Experience So Far
Source: IMF
Future of Cities Will Shape Post-COVID--19 World
March 2, 2021--STORY HIGHLIGHTS
Cities are at the frontline of the COVID-19 crisis and global response efforts.
The pandemic has revealed a new world of multiple, compounded risks.
By making the right investments and tackling deep-seated inequalities, cities can transform their economies and people's lives.
March 2021 will mark one year since the World Health Organization declared COVID-19 a global pandemic, upending lives and livelihoods. Cities are on the frontlines of this crisis, with dwindling economic activity, high rates of infection and inadequate resources.
In cities, which are home to over half of the world's population, long-standing inequities have been deepened by the pandemic. Although urbanization has been accompanied by lower poverty, job creation and growth, distribution of such urban gains has been uneven, often marked by striking spatial, social and economic inequalities.
Today, urban dwellers working informal, and often precarious jobs, are part of the swelling ranks of "new poor" created by the pandemic. That is in addition to other vulnerable groups of people who often live in crowded urban areas with limited means to practice safe handwashing or social distancing.
Source: World Bank
BIS-The anatomy of bond ETF arbitrage
March 1, 2021--Exchange-traded funds (ETFs) allow a wide range of investors to gain exposure to a variety of asset classes. They rely on authorised participants (APs) to perform arbitrage, ie align ETFs' share prices with the value of the underlying asset holdings. For bond ETFs, prominent albeit understudied features of the arbitrage mechanism are systematic differences between the baskets of bonds used to create and redeem ETF shares, and a low overlap between these baskets and actual asset holdings.
These features could reflect the illiquid nature of bond trading, ETFs' portfolio management and APs' incentives. The decoupling of baskets from holdings weakens arbitrage forces but allows ETFs to absorb shocks on the bond market. 1
Key takeaways
Bond exchange-traded funds (ETFs) have grown to manage more than $1.2 trillion of assets globally.
The arbitrage mechanism, which keeps bond ETF prices aligned with the value of the underlying investments, operates differently from that of equity ETFs.
This difference potentially makes it harder for investors to exploit price gaps but allows bond ETFs to absorb shocks and withstand market stress.
Source: BIS
Markets wrestle with reflation prospects: BIS Quarterly Review
March 1, 2021-Prospects of a more robust economic recovery buoyed risky asset prices, with signs of exuberance reflected in the behaviour of retail investors.
Sovereign yield curves steepened as investors priced in higher inflation and fiscal support.
Sentiment towards emerging market assets remained favourable, in particular in East Asia.
The latest BIS Quarterly Review reports that risky assets strengthened further during the review period.1 This buoyancy was set against a backdrop of continued strong monetary accommodation, growing expectations of fiscal stimulus, and cautious but fluctuating optimism about recovering from the pandemic.
Elevated risk appetite was reflected in continued strong corporate debt issuance, especially by lower-rated firms. Many stock indices reached all-time highs in February with equity fund-raising reviving memories of the late 1990s tech boom as retail investors flexed their increasing influence on market dynamics.
Search for yield underpinned the broadly positive sentiment towards emerging market assets, particularly in East Asia, supporting portfolio flows into these economies.
Source: BIS
Greening (runnable) brown assets with a liquidity backstop
March 1, 2021--Summary
Focus
The momentum toward greening the economy brings with it a number of new transition risks, which, if not properly addressed, may threaten financial stability. In particular, the expectation that other investors may exclude high carbon corporate emitters from their portfolio creates a risk of runs on brown assets. Understanding and acknowledging this new source of financial instability is essential for government agencies in charge of preserving the soundness of financial systems.
Contribution
We analyse whether a market economy where polluting firms are subject to a run risk can sufficiently incentivise those firms to reduce their carbon emissions, and how the laissez faire allocation fares relative to one that could be provided by policymakers. We postulate that uncertainty on the level of carbon-emission intensity that will be tolerated by consumers, investors or regulators can result in runs on significant shares of financial assets. In this context, we propose a liquidity backstop facility that helps restore efficiency. We show how offering such a backstop, whose access fee is proportional to the carbon emission of corporates, can prevent such runs while greening output.
Source: BIS
Renewable energy: common myths debunked
March 1, 2021--Outdated misconceptions about the reliability and affordability of renewable energy must be challenged.
The transition to renewable energy is being driven by consumer demand and is happening faster than previously thought.
Grids of the future are already being built -buildings equipped with microgrids connected by software.
Critics of renewable energy often cite two reasons for why they think a transition from fossil fuels will take half a century.
Firstly, that sources of renewable energy are too intermittent to be reliable and secondly, that governments cannot bear the costs of switching entire economies to clean energy.
It’s about time these assumptions were challenged. These perceived obstacles for the mass adoption of clean, renewable energy technologies are quickly becoming outdated.
Myth: intermittency makes renewable energy unreliable
Conventional thinking has long held that renewable energy intermittency makes solar, wind and other green alternatives too unreliable. Thankfully, rapid technological innovation in recent years means this myth outdated.
It’s true that solar energy is only produced when the sun is shining on solar panels. Likewise, wind energy is dependent on the ebb and flow of air currents. But the sheer volume of renewable energy being deployed, the ability to store that energy for longer, and to match demand with supply using software, creates a balanced grid.
Source: World Economic Forum
The Haves and Have-nots Of the Digital Age
March 1, 2021--Accelerated by the pandemic,the digital future is coming at us faster than ever before,and maybe faster than we can imagine. In this issue of Finance & Development magazine, we explore the possible consequences-the good,the bad,and the gray.
For millions,technology has been a lifeline, changing the way we work, learn,shop, and entertain ourselves. In a year like no other, it has spurred game-changing digital shifts. Governments moved quickly,using mobile solutions to provide cash assistance; financial technology has helped the survival, and in some cases, growth of small-and medium-sized businesses; and the first national digital currency, in The Bahamas, provides a glimpse of the future of money.
Source: IMF
Tourism in a Post-Pandemic World
February 26, 2021--Tourism continues to be one of the sectors hit hardest by the COVID-19 pandemic, particularly for countries in the Asia-Pacific region and Western Hemisphere. Governments in these regions, and elsewhere, have taken measures to ease the economic shock to households and businesses, but longer-term the industry will need to adapt to a post-pandemic "new normal."
If you are hesitant to hop on a plane these days, you are not alone. According to the United Nations World Tourism Organization (UNWTO), tourist arrivals are estimated to have fallen 74 percent in 2020 compared to 2019.
Source: IMF
Groundbreaking Research Reveals the Financiers of the Coal Industry
February 25, 2021--US investors hold 58% of institutional investments in the coal industry
Commercial banks providing more money to the coal industry than in 2016
Japanese banks are top lenders, Chinese banks top underwriters
Today, Urgewald, Reclaim Finance, Rainforest Action Network, 350.org Japan and 25 further NGO partners published groundbreaking research on the financiers and investors behind the global coal industry.
"Our new research, however, analyzes financial flows to all 934 companies on the Global Coal Exit List (GCEL)1," says Katrin Ganswindt, head of financial research at Urgewald.Top Institutional Investors in the Coal Industry. In January 2021, 4,488 institutional investorsheld investments totaling US$ 1.03 trillion in companies operating along the thermal coal value chain. Among the investors covered by the NGOs' research are pension funds, mutual funds, asset managers, insurance companies, hedge funds, commercial banks, sovereign wealth funds and other types of institutional investors. The world's largest institutional investor in the coal industry is the US mutual fund company Vanguard with holdings of almost US$ 86 billion. It is closely followed by BlackRock, which holds investments of over US$ 84 billion in the coal industry.Together, these two investment giants account for 17% of institutional investmentsin the global coal industry.
Source: reclaimfinance.org
