The pension hole in European corporates

From Barclays’ Christophe Boulanger and Dominik Winnicki on the pension deficit risk building in QE’d Europe:

As evident in the end-June 2016 corporate results, the rise in pension benefit obligations (PBOs) and pension deficits is a broader theme for European corporates. Overall, pension deficits for the more-than 100 companies that we have screened are up 16% since endFY2015 and are likely to increase further in the July to December 2016 period given the continued fall in discount rates on the back of declining long-term yields that are not offset by returns on plan assets.

More importantly, we believe that such a trend is unlikely to improve in 2017 given quantitative easing policies (QE) by the European Central Bank and the Bank of England that will likely keep corporate yields low in the medium term.

Continue reading: The pension hole in European corporates

From Barclays’ Christophe Boulanger and Dominik Winnicki on the pension deficit risk building in QE’d Europe:

As evident in the end-June 2016 corporate results, the rise in pension benefit obligations (PBOs) and pension deficits is a broader theme for European corporates. Overall, pension deficits for the more-than 100 companies that we have screened are up 16% since endFY2015 and are likely to increase further in the July to December 2016 period given the continued fall in discount rates on the back of declining long-term yields that are not offset by returns on plan assets.

More importantly, we believe that such a trend is unlikely to improve in 2017 given quantitative easing policies (QE) by the European Central Bank and the Bank of England that will likely keep corporate yields low in the medium term.

Continue reading: The pension hole in European corporates

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)

QE: quantitatively shrinking collateral reuse

Adding to the QE scarcity concerns already highlighted by David earlier on Monday, here’s a couple of charts from Citi’s Hans Lorenzen reflecting the fundamental “too much of a good thing” problem with QE.

Continue reading: QE: quantitatively shrinking collateral reuse

Adding to the QE scarcity concerns already highlighted by David earlier on Monday, here’s a couple of charts from Citi’s Hans Lorenzen reflecting the fundamental “too much of a good thing” problem with QE.

Continue reading: QE: quantitatively shrinking collateral reuse

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

Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to.

But did things have to get this mean?

From CLSA’s Benthos:

Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

Continue reading: Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to.

But did things have to get this mean?

From CLSA’s Benthos:

Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

Continue reading: Discussing the BoJ’s alleged impotence…

Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to.

But did things have to get this mean?

From CLSA’s Benthos:

Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

Continue reading: Discussing the BoJ’s alleged impotence…

Fine, the Japanese stock market maybe isn’t paying attention to the Bank of Japan the way it used to.

But did things have to get this mean?

From CLSA’s Benthos:

Faced with the problem of when to fire its last bullet, the Bank of Japan decided to fire half a bullet at half-cock. Now, speculators will be free to take liberties, fortified by the knowledge that the BoJ has only enough powder left to miss the mark one more time. The yen surged derisively. Governor Haruhiko Kuroda warned he has ample room to extend bankkiller Nirp. Three years after saying he’d achieve 2% inflation in two years, he said he would achieve 2% inflation in two years. It seems the BoJ has entered the Age of Impotence.

Continue reading: Discussing the BoJ’s alleged impotence…

Koo on why helicopter money just won’t work

Helicopter money won’t work in Japan, says Nomura’s Richard Koo in a note on Tuesday, because when the typical Japanese citizen finds a 10,000-yen note lying on the ground, she will turn it in at the nearest police station rather than spend it.

Put differently, a helicopter money policy can only work if the people in a country have little sense of right and wrong.

Koo, of course, is talking about the effectiveness of actual banknotes being thrown out of helicopters in the sky. It’s one of four ways he thinks helicopter money policy could be implemented — since the real challenge with helicopter money is how it would be distributed, and to whom.

Continue reading: Koo on why helicopter money just won’t work

Helicopter money won't work in Japan, says Nomura's Richard Koo in a note on Tuesday, because when the typical Japanese citizen finds a 10,000-yen note lying on the ground, she will turn it in at the nearest police station rather than spend it.

Put differently, a helicopter money policy can only work if the people in a country have little sense of right and wrong.

Koo, of course, is talking about the effectiveness of actual banknotes being thrown out of helicopters in the sky. It's one of four ways he thinks helicopter money policy could be implemented -- since the real challenge with helicopter money is how it would be distributed, and to whom.

Continue reading: Koo on why helicopter money just won’t work

Koo: Why US Quantitative Easing “worked” better than other QEs

This is a guest post from Richard Koo, chief economist of the Nomura Research Institute and, amongst many other things, author of “The Holy Grail of Macroeconomics, Lessons from Japan’s Great Recession”, which lays out his balance sheet recession thesis in detail.

The post is an updated extract from his most recent note for Nomura and reproduced here, with his permission, for your arguing pleasure…

The US, the UK, Japan, and Europe all implemented quantitative easing (QE) policies, but the understanding of how those policies work apparently differs greatly from country to country, leading to very different outcomes. With the US economy doing better than the rest, there has been some debate in Europe as to why that is the case.

Continue reading: Koo: Why US Quantitative Easing “worked” better than other QEs

This is a guest post from Richard Koo, chief economist of the Nomura Research Institute and, amongst many other things, author of “The Holy Grail of Macroeconomics, Lessons from Japan’s Great Recession”, which lays out his balance sheet recession thesis in detail.

The post is an updated extract from his most recent note for Nomura and reproduced here, with his permission, for your arguing pleasure…

The US, the UK, Japan, and Europe all implemented quantitative easing (QE) policies, but the understanding of how those policies work apparently differs greatly from country to country, leading to very different outcomes. With the US economy doing better than the rest, there has been some debate in Europe as to why that is the case.

Continue reading: Koo: Why US Quantitative Easing “worked” better than other QEs