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’Breaking the Bank (in gilts)
This’ll be a controversial argument about the Bank of England’s buying of UK government debt, we know… but it comes from Philip Rush of Nomura:
Aggressive quantitative easing brings [gilt] market capacity constraints into play.
The LTRO rally is young, says SocGen
Or, taking the “three-year LTRO = QE” meme and running with it. Two charts via Societe Generale’s cross asset team on Monday:
Related links:
LTRO covers BNP, Credit Ag and SocGen 2012 funding –
The ECB has a communications problem
The Fed isn’t the only central bank grappling with flaws in its communications policy amid problems with its traditional policy transmission mechanisms.
Everyone is well aware of the ECB’s non-traditional measures to this point:
Das transmission
Just to warm you up for Thursday’s European Central Bank policy meeting…
Though not many are expecting a rate change, Societe Generale’s Kit Juckes points out that the German two-year bond yield is close to going lower than Japan’s:
Bob the Bear is expecting more of the same in 2012
The traditional 2012 outlook report is not for Bob ‘The Bear’ Janjuah and his sidekick Kevin Gaynor. The Nomura strategists want to keep things simple and to the point.
So their final note of the year comes in the form of Q&A.
What ECB QE could look like
Oh Mario, you big tease. From the FT on Thursday:
Mario Draghi, European Central Bank president, has called for a “fiscal compact” between governments to restore investor confidence in the eurozone – and hinted such a step could pave the way for a more aggressive ECB response to the region’s debt crisis.
Draghi’s fiscal compact
Mario Draghi’s speech to the European parliament on Thursday wasn’t just notable for what he had to say about the scarcity of eligible collateral and the impaired transmission mechanism for monetary policy.
Why sterling just got splattered
Impressive move following the Bank of England rebooting QE…
Some immediate reaction from Alan Ruskin of Deutsche Bank:
A few things stand-out immediately on BOE QE decision to do extra 75bn, which was more than the market expected,
Four months of UK QE
But not for Christmas! From the Asset Purchase Facility’s market notice for the BoE’s £75bn of further quantitative easing:
Asset Purchase Facility: Gilt Purchases
1. The MPC has decided on a further £75bn of gilt purchases as part of its programme of asset purchases financed by central bank reserves.
Bank of England restarts QE
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to increase the size of its asset purchase programme,
Beyond the QE2 adventure
While everything blows up… a blow-out speech by Adam Posen:
Make no mistake, the right thing to do right now is for the Bank of England and the other G7 central banks to engage in further monetary stimulus.
A return to asset purchases (in the UK)
We are a bit late to this, but here are selected highlights from Goldman Sachs prediction on Friday of further asset purchases by the Bank of England.
But this time Goldman economist Kevin Daly reckons there’s a good case for the BoE focusing on credit easing rather than the purchase of more gilts.
Against “Japan-ification”
Given that it’s the question of the hour…
The US economy, says Nomura’s Paul Sheard, is not looking anything like Japan in the early- to mid-1990s.
Well, maybe just a bit. But not really anywhere near similar enough to be staring down the barrel of a “lost decade”,
The Fed’s secret QE equivalent
Anyone catch this from the New York Fed on Friday? It’s hugely important:
Beginning Monday, August 15, the New York Fed intends to conduct another series of small-scale reverse repurchase (repo) transactions using all eligible collateral types.
Nobody messes with the SNB
Tuesday’s FOMC decision to extend a low rate environment until at least 2013 caused both the euro and the dollar to weaken quickly and significantly against the Swiss franc.
Never to be upstaged, the Swiss National Bank has now come out with its own counter-appreciation move for the Swiss franc.
Let’s twist again…
… like we did in the 60′s, when President Kennedy was in the White House. The US economy was in recession, had trouble with a lingering trade deficit, and there was an outflow of gold from the United States to Europe amounting to several billion dollars per year.
Just cross it out and do bigger numbers
Because if anyone gets the true essence of doing quantitative easing after failing first time round, it’s Japan, no?
Related link:
Inter-yention action – FT Alphaville
The difficulty of defining domestic inflation
Have you heard? High inflation is OK. Or rather, increasing the Bank Rate wouldn’t do much to solve it at this time.
It’s not really news if you’ve been watching recent justifications for UK monetary policy,
The calm before the (volatility) storm
We ♥ this note from Bank of America Merrill Lynch’s Ruslan Bikbov and Priya Misra.
It’s on a subject dear to our own hearts here on FT Alphaville — the curious case of persistently low volatility and the idea that it might be masking systemic risk.
Language games, with Albert
Another missive on the US recovery from the SocGen bear-king Albert Edwards and, uh-oh, paging Ludwig Wittgenstein:
Words fail me
What’s up Albert?
Dylan’s latest weekly extolled the virtues of holding cash when expected returns on equities look as poor as they do now…
QEnding: rates and fates
A lot of people have been hard at work lately disputing the Pimco-nian idea that the end of QE2 will lead to an inevitable climb in yields.
Bloomberg, in a story about the continued demand for off-the-run Treasuries,
The coming QEnding
Or, supply dynamics in quantitative easing. Required reading for a quiet Wednesday, really.
Remember how QE works. The Federal Reserve buys US Treasuries from investors in the hopes of pushing them into things like corporate credit,
QEased credit – but maybe not for long
It’s money money everywhere and not that much to buy.
Citigroup credit strategist Matt King has a nice note out on Wednesday attempting to delve into the ‘cash on the sidelines’ notion — or the idea that there’s a wall of money just waiting to be invested.
The banking system – still broken
Here’s a perfectly nuanced view of how quantitative easing — the programme started by the Federal Reserve to avert depression following an almighty banking bubble — impacts asset prices.
First, envision part of the QE process.
Two views on QEased commodities prices…
The role — if any — of easy monetary policy in pushing up commodities prices has become a hot-button topic recently. So here are two pieces of recent research on the subject, both from central banks.
Further further reading
For the commute home, we wish you a great weekend,
- Treasury + Fed = better QE.
- Gulf SWFs are adopting more active investment strategies.
- Is the dismal science really a science?
- March Madness,
The Bank of Japan – almost back to 2004 numbers
The Bank of Japan unleashed ¥28,000bn ($345bn) of fresh liquidity through its emergency quantitative easing operations over the course of the past week.
Which means we’re already not far off from the ¥34,000bn that the central bank was pumping into the market at the height of its QE programme back in 2004/2005.
Prepare for a major market over-reaction
Albert Edwards is back – back, that is, from his annual search for January sun to counter the effects of Seasonal Affective Disorder (SAD).
And the sojourn looks to have been partly successful. Obviously the Soc Gen strategist remains bearish — he reckons the long-term downtrend in 10-year bond yields is under serious threat.
On not accepting QE3, with Bob the Bear
Remember when Bob the Bear went bullish?
Bob Janjuah and Kevin Gaynor — global macro strategists formerly of RBS, now based at Nomura — said in October that markets were set to turn strongly ‘pro-risk’,
QE counter-factuals and counter-arguments
Here’s a pop quiz for macro fans: Federal Reserve asset purchases were equivalent to an X hundred basis point reduction in the federal funds rate and contributed Y million jobs. What are X and Y?
In a recent paper on zero lower bound events and the impact of quantitative easing,