BoJ motive suggestions (with bonus rejections)

Explaining the BoJ’s shift to Quantitative and Qualitative Easing (QQE) with yield curve control is hard.
Or, at least, doing so definitively is hard because everyone is very keen to point out reasons against whatever suggestion you’ve got.
Continue re…

Explaining the BoJ's shift to Quantitative and Qualitative Easing (QQE) with yield curve control is hard.

Or, at least, doing so definitively is hard because everyone is very keen to point out reasons against whatever suggestion you've got.

Continue reading: BoJ motive suggestions (with bonus rejections)

The ECB, innovation and yield targets

Where the BoJ leads the ECB may/may not follow.

You will all remember that last week the BoJ unveiled QQE with yield control — a 10yr yield target that may signal the end of QE as we know it.

Continue reading: The ECB, innovation and yield targets

Where the BoJ leads the ECB may/may not follow.

You will all remember that last week the BoJ unveiled QQE with yield control — a 10yr yield target that may signal the end of QE as we know it.

Continue reading: The ECB, innovation and yield targets

Good idea, bad idea: Yield targeting edition

Good idea: More reactive than a quantitative target; can signal long-term commitment to policy; potentially reduces purchases required if market believes your yield target is credible; potentially good for effectiveness of fiscal policy; potentially good for banks as it can imply a steeper yield curve; and allows for an “automatic exit” from the policy if everything goes to plan.

Screen Shot 2016-09-26 at 15.45.52

Continue reading: Good idea, bad idea: Yield targeting edition

Good idea: More reactive than a quantitative target; can signal long-term commitment to policy; potentially reduces purchases required if market believes your yield target is credible; potentially good for effectiveness of fiscal policy; potentially good for banks as it can imply a steeper yield curve; and allows for an “automatic exit” from the policy if everything goes to plan.

Screen Shot 2016-09-26 at 15.45.52

Continue reading: Good idea, bad idea: Yield targeting edition

Are bank reserves meaningless?

Is the central bank in the business of lending bank reserves for final and absolute settlement purposes, or is it now in the business of lending safe assets like Tbills for final and absolute settlement purposes?
Continue reading: Are bank reserves me…

Is the central bank in the business of lending bank reserves for final and absolute settlement purposes, or is it now in the business of lending safe assets like Tbills for final and absolute settlement purposes?

Continue reading: Are bank reserves meaningless?

Remember this day

We have the first ever negative yielding euro corporate bonds sold by companies that aren’t backed by the state.

— Gavin (@GavinHJackson) September 6, 2016

Continue reading: Remember this day

Continue reading: Remember this day

ECB warnings and yield target allusions

Or illusions…
Before that though, here is a thing we know and have known since the ECB launched its (probably) soon to be extended QE programme: Draghi et al will have to deal with the idea of QE scarcity — it’s running out of available bonds to buy…

Or illusions...

Before that though, here is a thing we know and have known since the ECB launched its (probably) soon to be extended QE programme: Draghi et al will have to deal with the idea of QE scarcity -- it's running out of available bonds to buy. It's already coming up against a self-imposed constraint and it has been well flagged that the big one, Germany, is looming as an ever larger roadblock.

Here is a thing we also know and have already mentioned in this post: The constraint is self-imposed and, as such, can be alleviated. Like this, for example:

Continue reading: ECB warnings and yield target allusions

We are the ECB. You will be assimilated

Or moved into riskier assets by the ECB’s corporate bond buying machine (CSPP to its friends).

Resistance may be futile but we’ll have to wait to make sure.

To move into those riskier assets you’d like to think that eventually the search for yield will become a real, worthwhile thing in Europe again. And not everyone buys that – Credit Suisse for example point out that over the last 2.5yrs in particular government bonds (bunds) have outperformed both high and low yielding credit assets. Their point is that “the time to hunt for yield as a dominant strategy (rather than as a short-term trade) might actually be when yields start to rise.”

But BofAML’s European credit team think it’ll maybe happen a bit sooner:

Continue reading: We are the ECB. You will be assimilated

Or moved into riskier assets by the ECB’s corporate bond buying machine (CSPP to its friends).

Resistance may be futile but we’ll have to wait to make sure.

To move into those riskier assets you’d like to think that eventually the search for yield will become a real, worthwhile thing in Europe again. And not everyone buys that – Credit Suisse for example point out that over the last 2.5yrs in particular government bonds (bunds) have outperformed both high and low yielding credit assets. Their point is that “the time to hunt for yield as a dominant strategy (rather than as a short-term trade) might actually be when yields start to rise.”

But BofAML’s European credit team think it’ll maybe happen a bit sooner:

Continue reading: We are the ECB. You will be assimilated

It feels good to be CSPP’d

That’s the ECB’s corporate sector purchase programme (CSPP), of course, which is having what looks to be an easy-to-spot effect on the cost of borrowing for those lucky enough to be inside the fold.

From Citi:

Continue reading: It feels good to be CSPP’d

That’s the ECB’s corporate sector purchase programme (CSPP), of course, which is having what looks to be an easy-to-spot effect on the cost of borrowing for those lucky enough to be inside the fold.

From Citi:

Continue reading: It feels good to be CSPP’d

Brexit, the Target2 angle

Everybody knows much of the City of London was vehemently opposed to Brexit because of fears of what might happen to banks’ interests if so-called “passporting” rights into and out of the European system were lost.

What is less talked about, however, is Brexit’s impact on the European payments clearing system, Target2 — and how the passporting issue connects by way of Target2 to the realm of sovereign monetary policy.

At the absolute heart of the matter is the status and treatment of payment systems worldwide, and whether or not they can really be treated as something independent and thus distinct from national monetary policy (and hence open to commercial competition) — or as integral to sovereign interests.

Continue reading: Brexit, the Target2 angle

Everybody knows much of the City of London was vehemently opposed to Brexit because of fears of what might happen to banks’ interests if so-called “passporting” rights into and out of the European system were lost.

What is less talked about, however, is Brexit’s impact on the European payments clearing system, Target2 — and how the passporting issue connects by way of Target2 to the realm of sovereign monetary policy.

At the absolute heart of the matter is the status and treatment of payment systems worldwide, and whether or not they can really be treated as something independent and thus distinct from national monetary policy (and hence open to commercial competition) — or as integral to sovereign interests.

Continue reading: Brexit, the Target2 angle