Virus will complicate Central Europe’s policy dilemmas

2021 ◽  
Keyword(s):  
Rule Of Law ◽  
Bond Markets ◽  
Government Bond ◽  
Bond Yields ◽  
The Czech Republic ◽  
Content Type ◽  
The Rule Of Law ◽  
Market Sentiment ◽  
Government Bond Markets ◽  
Low Levels

Significance Surging inflation across CE has coincided with a rapid worsening of current-account balances, particularly in Hungary, putting the region’s currencies under strain. It has exposed the vulnerability of CE government bond markets, with yields, particularly real yields, remaining at excessively low levels. Impacts The era of low bond yields and low currency volatility in CE may have run its course. A full-fledged CE currency crisis is unlikely: Poland, Hungary and the Czech Republic are still among the most resilient emerging markets. Hungary’s crucial elections in early 2022 will reduce the scope for fiscal tightening, making policy dilemmas more acute. EU concerns about the rule of law in Poland and Hungary threaten funds earmarked for both but have had little impact on market sentiment.

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.

Impact of regulatory changes on government bond market liquidity

2017 ◽  
Vol 25 (3) ◽  
pp. 307-317 ◽  
Author(s):  
Hans Blommestein
Keyword(s):  
Market Liquidity ◽  
Adverse Impact ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Market Participants ◽  
Regulatory Changes ◽  
Survey Results ◽  
Government Bond Markets ◽  
The Impact

Purpose The purpose of this study is to assess the seriousness of the impact of new regulatory factors on liquidity in government bond markets since the onset of the global financial crisis. Design/methodology/approach Questionnaires were circulated for examining the adverse impact of regulatory changes on liquidity. New evidence was presented about the adverse impact of the process of regulatory changes on market liquidity. Findings The paper presents new survey results on the adverse liquidity impact of regulations on market liquidity. Responses show that government issuers differ in their assessment on the severity of the impact of the various regulations. Determining this longer-term impact is quite complex because measures of liquidity may not only reflect the impact of regulatory changes, but also the responses by policymakers and market participants (to these regulatory changes), covering in particular the following: market transparency, trading practices, market infrastructure and other policies to promote liquidity, including by reducing unconventional monetary policy measures. Also, market dynamics may have become more complex due to responses by market participants. Practical implications Debt managers need to take into account regulations with a significant adverse influence on both market liquidity and the price discovery process. As liquidity in government bond markets also has a direct impact on funding possibilities and financing costs, funding liquidity may also be affected, especially during periods with market stress. This means that the funding strategy may need to be adapted. Originality/value The paper presents new survey results on the impact of new regulations on market liquidity. This assessment is quite complex because measures of longer-term liquidity may reflect the impact of regulatory changes and the responses by policymakers and market participants to these changes.

Latin American local bond markets prove resilient

2015 ◽  
Keyword(s):  
Local Government ◽  
Latin American ◽  
Foreign Investment ◽  
Developing Economies ◽  
Emerging Market ◽  
Insurance Companies ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Government Bond Markets

Subject Foreign investment in local government bond markets. Significance In stark contrast to the sharp declines in emerging market (EM) equity markets, down by 9.3% in dollar terms this year, the domestic government bond markets of developing economies remain relatively resilient, despite the dramatic falls in EM currencies. Latin America's main local debt markets have attracted the largest inflows of foreign investment among the main EM regions, with non-resident investors even increasing their holdings of Brazilian and Colombian domestic bonds this year in the face of declines of 46% and 23% in their respective currencies. Impacts China's latest interest rate cut on October 23 will put more pressure on many commodity-dependent EM economies. EM local government bond markets are underpinned by domestic institutional investors, such as pension funds and insurance companies. EM dollar-denominated government debt will prove more resilient than local currency bonds. However, companies with large external debts are vulnerable because of sharp falls in local currencies.

Virus storm will erode Hungarian government’s position

2020 ◽  
Keyword(s):  
Exchange Rate ◽  
Rule Of Law ◽  
Political Instability ◽  
Government Bond ◽  
Bond Yields ◽  
Content Type ◽  
Delayed Effects ◽  
The Exchange Rate ◽  
The Stability ◽  
The Eu

Significance Fidesz faces an election in spring 2022. The spectre of a weaker position in the EU and increased EU scrutiny on Hungary’s rule of law record could deal the party further blows. The opposition, set to hold primaries and stand as a bloc, is getting stronger. Impacts Political instability ahead of elections may produce only delayed effects on the exchange rate and government bond yields. An increasingly cornered Fidesz will be more unpredictable on the European stage, with bluffs and blackmail becoming common. Hungary’s and Poland’s budget veto could threaten the stability of the entire EU.

It Is Private, Not Public Finances that Are Out of Whack

2014 ◽  
Vol 15 (1) ◽  
pp. 166-190 ◽  
Author(s):  
Richard C. Koo
Keyword(s):  
Private Sector ◽  
Money Supply ◽  
Balance Sheet ◽  
Capital Flight ◽  
Bond Markets ◽  
Government Bond ◽  
Bond Yields ◽  
Money Multiplier ◽  
Government Bond Markets ◽  
Private Savings

Abstract When the private sector as a whole is forced into debt minimization following the bursting of a debt-financed bubble, the money multiplier turns negative at the margin and government borrowing and spending become essential in maintaining both the GDP and money supply. With unborrowed private savings languishing in the financial system, the market also encourages government borrowing in the form of low bond yields which is a natural corrective mechanism of an economy suffering from balance sheet recession. In the eurozone, this corrective mechanism fails because of the ease of capital flight between government bond markets within the currency zone.

Euro-area risks remain despite Greek breakthrough

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Euro Area ◽  
Bond Markets ◽  
Government Bond ◽  
Fiscal Union ◽  
Content Type ◽  
Government Bond Markets

Significance Impacts Despite a dramatic deterioration in Greece's relations with its creditors, financial markets have remained relatively unconcerned. The sharp sell-off in government bond markets since mid-April stems almost entirely from exaggerated fears about deflation, not Greece. Tensions over Greece reflect broader weaknesses in the euro-area stemming from a lack of support for political and fiscal union.

Balkan banks will raise Greek contagion fears

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Spillover Effects ◽  
Government Bond ◽  
Bond Yields ◽  
Content Type ◽  
The Us ◽  
South Eastern Europe ◽  
Bank Funding ◽  
Low Levels

Significance The loan let Greece make a scheduled payment to the ECB and settle arrears to the IMF. It is part of the agreement in principle with Greece's international lenders for a third package of financial assistance that has eased market fears about an imminent Greek exit from the euro-area ('Grexit'). Yet concerns about the solvency of the country's banking sector and Greece's membership of the single currency persist. In Emerging Europe, the spillover effects from a possible Grexit have diminished significantly since 2012, but the channels of contagion are strongest in the economies of South-Eastern Europe (SEE). Impacts The ECB's full-blown QE programme will help keep CEE government bond yields at extremely low levels across the region. The severe financial and economic crisis in many CEE states in 2008 has shown up the dangers of excessive reliance on parent bank funding. This is forcing local banks to rely more on domestic sources of financing. The biggest threat to sentiment towards Emerging Europe is another 'taper tantrum' when the US Fed raises interest rates later this year.

Momentum in Government-Bond Markets

CFA Digest ◽  
2013 ◽  
Vol 43 (1) ◽  
pp. 105-108
Author(s):  
Servaas Houben
Keyword(s):  
Bond Markets ◽  
Government Bond ◽  
Government Bond Markets
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