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From climate scenarios to forecasts: asset owners fall into one of five groups
August 3, 2020--What do asset owners actually believe will happen, asks Julian Poulter
It's a scary world for asset owners right now. Historically low interest rates are helping drive down returns with unmatched liabilities, against potentially the greatest recession ever, with politics reducing the productivity of globalisation and the looming climate transition waiting to stunt any recovery.
Governments must now decide if their stimulus dollars will promote a green transition in both the energy and land systems or add to the problem. And asset owners must second guess the impact of their decisions and anticipate further disruptive intervention.
IMF-The Central Bank Transparency Code
July 30, 2020--Summary:
The paper reports to the Executive Board on its decision of April 29, 2019, to prepare an IMF Central Bank Transparency Code (CBT), which is linked to the 2017 Review of the Standards and Codes Initiative (RSCI), for a revision and update of the 1999 Monetary and Financial Policies Transparency Code (MFPT).
Directors asked that the CBT should remove the overlap on financial policies covered by other international standards, expand the transparency standards to broader set of activities undertaken by many central banks since the 2008 financial crisis, and reorient the transparency standards to facilitate risk-based assessments to support policy effectiveness and address macroeconomic risks.
Impact of Conflict and Political Instability on Banking Crises in Developing Economies
July 29, 2020--While the economic effects of conflict and political instability have been analyzed extensively,much less attention has been paid to how banks are affected.
Our IMF staff paper addresses this gap by investigating whether rising conflict and political instability globally over the past several decades has led to more banking crises in developing countries.
Our study focuses on the potential impact of conflict and political instability on systemic banking crisis in 92 developing countries over the period 1970-2016.
ESG investors wake up to biodiversity risk
July 29, 2020--As environmental, social and governance investing has swept across the financial world, the "E" in ESG has become nearly synonymous with attempts to mitigate climate change.
But while the climate crisis is one of the planet's gravest problems, it is not the only environmental threat that needs tackling.
Companies and investors are becoming increasingly concerned about the significant financial risks stemming from biodiversity loss and the destruction of natural ecosystems.
Bassanese Bites: Double dip?
July 27, 2020--Global markets
Global equities tried hard to break higher early last week on the back of more hopeful vaccine news and Europe's long-awaited stimulus package, though ended the week on the back foot due to renewed U.S.-China tensions and higher than expected U.S. weekly jobless claims.
America's ongoing COVID-19 battle and Congressional wrangling over the next U.S. stimulus bill also kept markets on edge. Somewhat surprisingly, however, America's long feared Q2 earnings reporting season is so far proving better than expected, with an above average 80% of the 128 companies that have so far reported beating (heavily reduced) estimates. Key indices of U.S. service and manufacturing activity also both pushed higher in July, though by slightly less than expected.
Why 'tracking difference' is a vital metric for passive ETFs
July 27, 2020--In theory, the overwhelming majority of ETFs are very simple creatures. They are passive vehicles, designed to replicate the return of a diversified index of securities, whether that be equities, bonds or something more outlandish.
Why 'tracking difference' is a vital metric for passive ETFs
The total expense ratio is the ‘price tag’ of a fund-but it does not tell the full story.
ETFGI reports assets invested in actively managed ETFs and ETPs reached a new record high of 182.72 billion US Dollars at the end of June 2020
July 24, 2020--ETFGI, a leading independent research and consultancy firm covering trends in the global ETF/ETP ecosystem, reported today that actively managed ETFs and ETPs saw net inflows of US$7.04 billion during June, bringing year-to-date net inflows to US$26.69 billion which is significantly more than the US$16.41 billion gathered at this point in 2019.
Assets invested in actively managed ETFs/ETPs finished the month up to 8.1%, from US$168.98 billion at the end of May to US$182.72 billion a new record, according to ETFGI''s June 2020 Active ETF and ETP industry landscape insights report, an annual paid-for research subscription service. (All dollar values in USD unless otherwise noted.)
Highlights
Assets in actively managed ETFs/ETPs reached a new record high of $182.72 Bn at the end of June.
YTD net inflows of $26.69 Bn are significantly more than the $16.41 Bn gathered at this point in 2019
Actively managed fixed Income ETFs/ETPs account for 67.4% of overall assets followed by 27.1% in equity products.
Unemployment in Today's Recession Compared to the Global Financial Crisis
July 23, 2020--There has been much discussion in recent months about how workers who transitioned to working from home-and those who were deemed "essential"-are less affected by the layoffs and job losses brought on by lockdowns than are workers in "social" jobs that require closer human interaction, like restaurant workers. However, our new IMF staff research suggests that this does not tell the full story.
In particular, we find that while teleworkable jobs are indeed more secure than non-teleworkable occupations during the current pandemic-related recession, this pattern has also been observed during the global financial crisis of 2007-09-meaning that something more than pandemic-related restrictions is at play.
Inflation at risk from Covid-19
July 23, 2020--Key takeaways
The pandemic has increased downside tail risks in advanced economies (AEs), while it has increased both downside and upside tail risks in emerging market economies (EMEs).
The collapse in output and oil prices, on balance, increases downside inflation risks.
Recent exchange rate depreciations increase upside risks to inflation in EMEs.
Tighter financial conditions raise both downside and upside risks. In AEs, the increase in downside risks is more prominent.
BIS: Effects Of Fed Policy Rate Forecasts On Real Yields And Inflation Expectations At The Zero Lower Bound
July 21, 2020--Focus
Long-term real interest rates play an important part in the transmission of monetary policy measures to aggregate demand. But there are concerns that the unconventional monetary policy tool of forward guidance may not be effective when policy rates fall to zero, ie reach their zero lower bound (ZLB). A further concern is that the publication of policy rate forecasts at the ZLB may be perceived as an unconditional commitment, thus undermining the credibility of monetary policy.
We investigate both these concerns for the policy rate forecasts made by the Federal Reserve in its Summary of Economic Projections (SEP).
Contribution
We study how surprises in the Fed's SEP policy rate forecasts made at the ZLB affect real yields and breakeven inflation rates across the yield curve. We use forward rates with horizons from two to 10 years ahead derived from nominal and index-linked US government bonds.
Findings
We find that surprises in the SEP policy rate forecasts significantly affect real yields in the expected direction across the yield curve. By contrast, breakeven inflation rates are little affected, including five-year breakeven inflation rates five years ahead, a common measure of monetary policy credibility. This suggests that policy rate forecasts by the Fed at the ZLB managed to affect real yields without adversely affecting monetary policy credibility.