Weak lira will reflect Turkish election fears

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Strong Support ◽  
Bond Markets ◽  
Content Type ◽  
Downward Pressure ◽  
Inflation Rates ◽  
The Us ◽  
Government Bond Markets ◽  
High Share ◽  
China’S Economy

Significance Increased uncertainty in financial markets, following the US Federal Reserve's decision in September to delay tightening monetary policy because of concerns about China's economy, is testing the resilience of Emerging Europe's local government bond markets. Poland and Hungary are vulnerable given the very high share of foreign holdings, but sentiment is bleakest towards Turkish assets, with the lira falling by 10% against the dollar since mid-August. Impacts Some EM bond markets have escaped dramatic falls in equities and currencies, partly due to local institutional investors' strong support. CE economies are better placed to cope with a China- and commodities-induced deterioration in sentiment. This is because of Central Europe's negligible linkages with China and its status as a net oil importer. The 22% decline in oil prices since early July is putting further downward pressure on already subdued CE inflation rates. This will keep monetary policy loose and help underpin growth.

Fed move boosts tight Latin American monetary policy

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Latin American ◽  
Commodity Prices ◽  
Content Type ◽  
The Us ◽  
Capital Outflows ◽  
Government Bond Markets ◽  
The Impact ◽  
First Time

Subject The impact of US monetary policy tightening. Significance Following the US Federal Reserve's (Fed) historic decision to raise rates for the first time since 2006, the start of the Fed's monetary tightening cycle is accentuating the hawkish stance of Latin America's main central banks. This comes amid a dramatic sell-off in commodity markets, persistent concerns about China's economy and a severe deterioration in economic conditions across the region. Impacts EM asset prices have remained relatively resilient to the rise in US interest rates, in stark contrast to the 'taper tantrum' in 2013. Hitherto-resilient regional local currency government bond markets will face foreign capital outflows due to falling commodity prices. The Brazilian real is 2015's worst-performing major EM currency, but due largely to political and economic difficulties at home.

Turkey looks to ride out financial assets volatility

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Investor Sentiment ◽  
Military Coup ◽  
Bond Markets ◽  
Financial Assets ◽  
Content Type ◽  
Inflation Rates ◽  
Government Bond Markets ◽  
Global Government

Significance The Central Bank is expected to keep its main interest rates on hold, despite the lira continuing to fall sharply against the dollar and headline and core inflation rates that are more than 2 percentage points above the TCMB's 5% target. The toxic combination of an escalation in the crackdown following the botched military coup in July and, crucially, a sharp deterioration in investor sentiment towards emerging markets (EMs) since Donald Trump's election as US president have put Turkish assets under renewed strain. Impacts EMs are currently on the sharp end of a fierce sell-off in global government bond markets. Investors are repositioning their portfolios in anticipation of more aggressive hikes in interest rates during a Trump presidency. The sell-off comes amid improving EM fundamentals, unlike the 'taper tantrum' after the Fed unexpectedly shrank asset purchases in 2013. Turkey's creditworthiness will continue to suffer after the botched military coup. Limiting the scope for a full-blown financial crisis is its banking sector, among the emerging world's best capitalised and most resilient.

Deflation trend in Central Europe will keep rates low

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Europe ◽  
Investor Sentiment ◽  
Economic Conditions ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Government Bond Markets ◽  
Low Levels ◽  
Very High

Significance The pick-up in growth contrasts markedly with the sharp falls in inflation across Central Europe (CE). With CE government bond markets under renewed pressure, monetary policy is likely to remain extremely loose as inflation struggles to rise above zero. Impacts CE is enjoying 'Goldilocks' economic conditions, with deflation requiring extremely loose monetary policy amid brisk growth. The ECB's aggressive bond-buying programme will keep yields anchored at extremely low levels, benefiting CE's local debt markets. While investor sentiment is favourable, very high foreign participation in Polish and Hungarian domestic bond markets is causing concern.

Markets are downplaying PiS election risks in Poland

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Foreign Currency ◽  
Strong Support ◽  
Commodity Prices ◽  
Wide Margin ◽  
Content Type ◽  
Opinion Polls ◽  
China’S Economy

Significance Despite PiS's costly spending pledges, its nationalist and populist views and its strong support for a controversial, Hungarian-style debt-relief scheme for holders of foreign currency-denominated mortgages, the prospect is causing little anxiety in financial markets. Investors are taking the view that PiS, which is leading the ruling Civic Platform (PO) party by a wide margin in opinion polls, will be forced to renege on many of its campaign promises. Impacts Poland is less vulnerable to the VW scandal, auto manufacture accounting for a much larger share of Czech and Hungarian jobs and GDP. A hard landing for China's economy is now seen as the largest threat to financial markets, as opposed to a rise in US interest rates. Central Europe's economies are better placed to cope with deteriorating sentiment towards EMs. Downside risks to inflation from falling commodity prices and slower EM growth put the NBP under pressure to loosen monetary policy further.

Czech koruna may avoid Swiss-style turmoil

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Oil Prices ◽  
Central Banks ◽  
Oil Price ◽  
Bond Markets ◽  
Price Rise ◽  
Content Type ◽  
Downward Pressure ◽  
National Bank

Subject The central bank's plans to lift its three-year cap on koruna/euro appreciation. Significance Mounting speculation that the Swiss-inspired currency floor might be scrapped early has led to upward pressure on the currency, buoying demand for shorter-dated Czech local bonds and forcing the Czech National Bank (CNB) to intervene more aggressively to weaken the koruna. While inflation rose to 0.6% in August, there are fears that removing the cap could lead to excessive appreciation of the koruna, putting downward pressure on growth and inflation. Impacts Concerns about ECB monetary policy efficacy, and possible early scaling-back of QE, are making Europe's bond markets increasingly jittery. Oil prices have risen past the psychologically important 50 dollars/barrel level, improving the outlook for inflation. Provided the oil price rise is sustained, this will ease pressure on central banks to loosen monetary policy further. The German economy's slowdown, due to a dearth of investment, is a drag on smaller CEE export-led economies such as Hungary and Slovakia.

scholarly journals Asymmetric Impacts of Inflation on the US Bond Rates and FED’s Pre-Emptive Policy

2020 ◽  
Vol 5 (2) ◽  
pp. 143-157
Author(s):  
İsmet Göçer ◽  
Serdar Ongan
Keyword(s):  
Monetary Policy ◽  
Inflation Rate ◽  
Lower Cost ◽  
Fisher Equation ◽  
Ardl Model ◽  
Nonlinear Ardl ◽  
Inflation Rates ◽  
Nonlinear Ardl Model ◽  
The Us ◽  
Asymmetric Impact

Abstract This study investigates the asymmetric impacts of changes in inflation rates on the US bond rates. This investigation is constructed on the Fisher Equation. To this end, the nonlinear ARDL model is applied. Empirical findings indicate that only the decreases (π− t ) in inflation rates affect bond rates. This asymmetric impact therefore shapes the FED’s monetary policy in terms of determining the bond rates at lower cost. When the inflation rate rises, the FED will know (in advance) that they do not need to increase the bond rates. This reminds us the FED’s former pre-emptive strike policy against inflation.

scholarly journals Fed and ECB: which is informative in determining the DCC between bitcoin and energy commodities?

2020 ◽  
Vol 4 (1) ◽  
pp. 77-102
Author(s):  
Abdelkader Derbali ◽  
Lamia Jamel ◽  
Monia Ben Ltaifa ◽  
Ahmed K. Elnagar ◽  
Ali Lamouchi
Keyword(s):  
Monetary Policy ◽  
Design Methodology ◽  
Commodity Markets ◽  
Portfolio Risk ◽  
Conditional Correlation ◽  
Predictive Capacity ◽  
Federal Funds ◽  
Content Type ◽  
The Us ◽  
Risk Managers

PurposeThis paper provides an important perspective to the predictive capacity of Fed and European Central Bank (ECB) meeting dates and production announcements for the dynamic conditional correlation (DCC) between Bitcoin and energy commodities returns and volatilities during the period from August 11, 2015 to March 31, 2018.Design/methodology/approachTo assess empirically the unanticipated component of the US and ECB monetary policy, the authors pursue the Kuttner's approach and use the federal funds futures and the ECB funds futures to assess the surprise component. The authors use the approach of DCC as introduced by Engle (2002) during the period from August 11, 2015 to March 31, 2018.FindingsThe authors’ results suggest strong significant DCCs between Bitcoin and energy commodity markets if monetary policy surprises are incorporated in variance. These results confirmed the financialization of Bitcoin and commodity energy markets. Finally, the DCC between Bitcoin and energy commodity markets appears to respond considerably more in the case of Fed surprises than ECB surprises.Originality/valueThis study is a crucial topic for policymakers and portfolio risk managers.

Central bank action will drive global equity markets

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Markets ◽  
Economic Data ◽  
Equity Prices ◽  
Monetary Policies ◽  
Content Type ◽  
Market Sentiment ◽  
The Us ◽  
Us Monetary Policy

Significance This volatility is driven by expectations of further monetary stimulus in response to a slowing economy. Despite persistent concerns about the fallout from the anticipated tightening in US monetary policy and many country-specific risks, such as the standoff between Greece and its creditors, equity market sentiment remains supported by accommodative monetary policies worldwide and expectations of the US monetary policy tightening being gradual. Impacts Market volatility could increase further, as better-than-expected economic data in the euro-area vies with weaker-than-anticipated US data. Decoupling of surging equity prices and weak economic fundamentals threatens the rally's sustainability, increasing scope for volatility. This decoupling is most pronounced in China, where weak economic data prompt buying of equities in anticipation of stimulus measures. The greatest risk in equity markets is uncertainty surrounding US interest rates and their impact on emerging markets.

Global liquidity risks a heavy slump in EMs

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Regulation ◽  
Market Liquidity ◽  
Bond Markets ◽  
Content Type ◽  
Sovereign Bonds ◽  
Advanced Economies ◽  
Boom And Bust ◽  
Global Liquidity ◽  
Boom And Bust Cycle

Subject Global liquidity trends. Significance Concerns over global liquidity have resurfaced since late 2014, both in advanced and emerging markets (EMs). Both central banks and the IMF note that market liquidity has declined, especially in bond markets, due to stricter regulations on derivatives trading in advanced economies, lower sovereign bonds demand in some countries and the end of the credit boom in some EMs. Global liquidity is a loosely defined concept that can be interpreted in different ways and covers a variety of countries and market realities. Impacts Liquidity is highly cyclical and follows a 'boom and bust' cycle. Accomodative monetary policy and financial regulation may partly offset the exposure to global liquidity volatility. US monetary policy tightening could exacerbate an EM crisis, where corporates have heavily issued dollar-denominated debt. The ECB monetary policy will remain accommodative until at least March 2017 partly offsetting risks of a global liquidity shortage.

Prospects for the global economy in the fourth quarter

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Global Economy ◽  
Fourth Quarter ◽  
Content Type ◽  
Bank Of China ◽  
Policy Interventions ◽  
The Us ◽  
Global Demand ◽  
Global Growth ◽  
China’S Economy

Subject Prospects for the global economy in the fourth quarter. Significance Three threats are on the horizon. Firstly, the US Federal Reserve (Fed) might raise interest rates this year. This move, though well signalled, may have negative repercussions, especially in emerging markets (EMs). Secondly, China's economy, a key to global growth, is slowing and its financial markets are exceptionally volatile. These factors have already elicited policy interventions such as renminbi depreciation and further rate cuts by the People's Bank of China (PBoC). Finally, there is no apparent end in sight to weak global demand and the fall in commodities prices that has left commodity-exporting countries struggling with precipitous drops in revenue.

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