Posts tagged 'Quantitative Easing'

The end of QE?

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| May 16 18:12 | Comment |

Marc Ostwald at Monument Securities has spotted that an important theme is developing: a rise in the number of warnings about QE suspension and QE exit.

As he noted on Thursday regarding the recent warnings from the BIS and the IMF:

To my jaundiced eye, I would have to say that the warnings below from the BIS and IMF within one hour of each other today on QE, suggests that this is the beginning of the end for QE! Am not sure that everyone else will share that view, but this cannot be a simple coincidental warning shot that has no material consequences – watch this space!

 Read more

BoJ sees good things, everywhere…

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Apr 26 08:19 | Comment |

It’s been a big day for the Bank of Japan. The QE programme was re-affirmed, as expected, and inflation and growth forecasts were raised, including a new 2015 CPI forecast of 1.9 per cent. It all looks thoroughly positive — especially if you ignore all the assumptions.  Read more

Guest post: QE on steroids in Japan

| Apr 09 09:31 | Comment |

This is is a guest post from Philip Pilkington, a writer and research assistant at Kingston University.

In January of this year I noted that the Japanese government was embarking on a stimulus programme and briefly enquired into whether it would likely work or not . At the time media commentary was mixed. Some were saying that it would be a complete failure while others were overflowing with optimism. I was slightly more reserved. Read more

Estimating the LSAP effect on the stock market

| Mar 13 15:28 | Comment |

This guest post is submitted by Donald Luskin, chief investment officer of Trend Macrolytics. A hat tip to Lorcan Roche Kelly, chief Europe strategist of Trend Macrolytics and longtime friend of FT Alphaville, for the suggestion.

An abiding narrative explaining the melt-up in US equities — despite a sluggish economy and slow earnings growth — is that quantitative easing by the Fed amounts to printing money, which finds its way into stocks. Read more

Kuroda! The BoJ’s goldilocks

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Feb 25 09:29 | Comment |

This Monday edition of rising Japanese equities/weak yen is brought to you by Haruhiko Kuroda, president of the Asian Development Bank and according to various media reports, the likely nominee for Bank of Japan governor.

Kuroda reportedly said early this month he was quite happy at the ADB and had nearly four years to serve of his third term. But to that we say: Mark Carney! Read more

From bubbles to wobbles

Paul Murphy is the founding editor of FT Alphaville.

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| Feb 21 10:25 | Comment |

Western markets were all a-jitter on Thursday. Obviously we can blame the Fed. Bickering between central bankers just doesn’t look good, whether they are American, British or continental Europeans.

An immediate question is raised: are we witnessing the end of ‘fast and loose’ policy? The quick answer is probably ‘not yet,’ although yes, it will end, and maybe sooner than some had come to assume. This presents a fresh challenge for policy markets, as noted by Lloyds’ Charles Diebel: Read more

Has BoJ policy changed THAT much?

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Jan 22 09:06 | Comment |

Are the BoJ’s newly-announced measures really that dramatic?

For all Shinzo Abe’s talk of urgency in meeting the new 2 per cent inflation target, the BoJ itself doesn’t actually expect it to happen that quickly. In the forecasts accompanying today’s statement, the BoJ has maintained the 2013 CPI forecast of 0.4 per cent made back in October — which is probably fair enough as the open-ended programme doesn’t actually start until next year — and only moved its 2014 up to 0.9 per cent from 0.8 per cent. Read more

The end of RoRo, or is it?

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jan 07 11:45 | Comment |

Last week, Kit Juckes at SocGen was one of many analysts who, after looking at the latest FOMC minutes, found fit to arrive at one overriding conclusion: the era of Risk-on, Risk-off (RoRo) investing is arguably coming to an end.

As he explained… Read more

When stimulus becomes stealth nationalisation

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jan 03 17:05 | Comment |

A big hat tip to Climateer Investing for helping us catch up on a Telegraph story from Ambrose Evans-Pritchard on Japan’s latest plan to stimulate itself out of trouble.

It, by the way, neatly sums up the problem associated with taking QE to the next level which, of course, for the Japanese authorities might have been buying equities outright rather than buying in ETF index form, which they’ve already been doing for a couple of years or so…

Think about it — a central bank en route to becoming a majority holder in a country’s primary equity ETF, is nothing more than a central bank en route to becoming the market. Read more

How cancelling central banks’ holdings of government debt could be a useful thing

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Dec 05 2012 08:45 | Comment |

We’ve run a couple of posts here on FTAV recently about how cancellation of QE debt isn’t really such a big deal: more an accounting change than anything material because both treasuries and central banks are part of the public sector.

Here is an argument that this mere accounting exercise could be worthwhile — particularly if the debt-laden developed countries descend into another downturn. Read more

Hey, Japanese government – leave the BoJ alone (says Koo)

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Nov 07 2012 08:45 | Comment |

The Bank of Japan’s unprecedented joint statement with the Japanese government after the central bank’s October meeting raised eyebrows around the world. The BoJ was already widely seen as having come under increased political pressure in recent months as the country’s economy had slowed; so what did the joint statement mean?

The statement contained a couple of key declarations: “The Bank strongly expects the Government to vigorously promote measures for strengthening Japan’s growth potential”, and “The Government strongly expects the Bank to continue powerful easing as outlined in section 2 until deflation is overcome.” Read more

“Cancelling” QE debt

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Oct 25 2012 10:00 | Comment |

There’s something we’ve never quite got about this debate on “cancelling” all the government bonds acquired by central banks under quantitative easing, either for helicopter money or for debt relief.

Now the Governor of the Bank of England has weighed in: Read more

Magnus, on spending our way out of the Mumps

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Oct 09 2012 15:43 | Comment |

According to George Magnus of UBS, most of the western world has now been struck down by “most unusual monetary policies” or ‘Mumps’ for short. And — contrary to popular belief — the disease is being underpinned not by western profligacy but possibly the very phenomenon. Too much thrift. The want and need for too many savings in an economy that demands spending on available capacity and goods today — a theme also actively being explored by Paul Krugman as part of his anti-austerity reasoning. Read more

Rubik’s Revolutions

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Oct 03 2012 12:02 | Comment |

We introduced our Rubiks QE analogy on Tuesday. This post is a continuation, in which we apply the analogy to the crisis so far.

Before we go on we should point out that the Rubik’s is a simplification, as are the concepts of “tomorrow money” and “today money”. There are and will always be areas that call for further explanation, but which we haven’t covered in this post. If they’ve been left out, it’s mostly due to post-length constraints. It’s not because we are wilfully ignoring them. Read more

A new era for FX

David joined the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

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| Oct 02 2012 12:41 | Comment |

Today carry’s hold on FX has waned as global rates gravitate towards zero, forcing the FX market to react instead to the far more ambiguous implication of QE. By contrast, other asset classes, notably equity markets, provide a cleaner mechanistic link between a given view and a price.

The conclusion is that even if we knew the outcome of future events with certainty, the FX market is not the best place to reflect those views. We have fallen to the bottom of the food chain. Read more

HSBC: Don’t say printing!

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Sep 28 2012 15:52 | Comment |

This is reassuring (or not – we can’t decide). The Global fixed income strategy team at HSBC *believe* they’ve come up with a non-consensus view on the effects of QEternity:

Our non-consensus view is that QE3 will drive US Treasury yields to new lows Read more

QEs compared

David joined the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

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| Sep 21 2012 14:42 | Comment |

Yes, yes, this QE ain’t the last QE and heaven knows the outcomes aren’t straightforward and depend on a shed load of variables. But a comparison is always worthwhile — or, at least, fun. So, here’s a relatively straightforward one from Deutsche Bank’s Alan Ruskin comparing the effects of QEs 1, 2 and 3.

First on the dollar index (try to spot the profit taking before the downward trend resumes): Read more

QuEstionable effects on FX charted

David joined the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

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| Sep 20 2012 16:46 | Comment |

The dollar index is now up 0.4 per cent since the Fed announced QE3 and up 0.3 per cent against the euro after having lost near 1 per cent initially. The euro is now back under $1.30. Meanwhile the yen has gained 0.7 per cent against the dollar and 1.4 per cent against the euro since the Bank of Japan put its moderate amount of stimulus into the field. Go figure:

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A currency war campaign plan for the BoJ

David joined the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

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| Sep 19 2012 09:45 | Comment |

(Chart from RBC Capital Markets.) Read more

The unintended consequences of QE: not what you think

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Aug 29 2012 12:06 | Comment |

By now, everyone is familiar with the mantra that QE is [arghh!] money-printing and that a major unintended consequence could be a chronic and uncontrollable inflation. (One could call this the goldbug, Austrian, Republican case).

Less well known, perhaps, is the theory that QE could be just as unexpectedly deflationary — because long-term micro yields come to threaten a number of financial sectors outright, as well as general expectations of risk-free returns which lead to capital destructive feedback loops. Read more

The winners and losers of QE, by the BoE

David joined the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

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| Aug 23 2012 12:30 | Comment |

This the Bank of England’s report into the distributional effects of its asset purchases. Click through the image for the full doc:

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Gold QE

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Aug 07 2012 17:51 | Comment |

The calls for QE3 continue to rage.

But as FT Alphaville has discussed at length, QE3 in its conventional guise — freshly minted base money in exchange for US government bonds — might not really be an option due to the squeeze it causes in the US Treasury market. Read more

The academics on QE… for now

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

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| Jul 24 2012 19:48 | Comment |

We’ll be back later with a proper preview of next week’s FOMC meeting, but for now here is something to argue about:

1. QE1 was more effective than QE2. Read more

Hysteresis in the UK

David joined the FT in 2011 as a Marjorie Deane fellow. He covered emerging markets, equities and currencies before making the jump over to FT Alphaville in May 2012.

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| Jul 19 2012 16:33 | Comment |

The U.K. economy has been flat for nearly two years. This stagnation has left output per capita a staggering 14 percent below its precrisis trend and 6 percent below its pre-crisis level. Weak growth has kept unemployment high at 8.1 percent, with youth unemployment an alarming 22 percent.

The effects of a persistently weak economy and high long-term unemployment can reverberate through a country’s economy long into the future—commonly referred to by economists as hysteresis. Read more

The negative carry universe

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jul 04 2012 16:16 | Comment |

This is a follow-up to our post on “base money confusion“, which incorporates some of the ideas we’ve raised in our “beyond scarcity” series.

Let’s assume a few truths (we’re sure they’ll be up for debate, but here goes anyway): Read more

Fed(wire) to the rescue

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Jun 06 2012 01:15 | Comment |

From the WSJ’s Jon Hilsenrath:

Disappointing U.S. economic data, new strains in financial markets and deepening worries about Europe’s fiscal crisis have prompted a shift at the Federal Reserve, putting back on the table the possibility of action to spur the recovery. Read more

Will rates stay low, QE or no?

| Jun 04 2012 20:17 | Comment |

It was inevitable that the abysmal payrolls report last Friday would make louder the calls for another round of quantitative easing from the FOMC, which meets later this month.

QE can take various shapes, but we wanted to mention something about the specific idea of the Fed buying up more US Treasuries: as a few analysts have pointed out recently, there’s a pretty good chance that rates will stay low no matter what the Fed does. Read more

You will buy more Govvies, or else

| Apr 28 2012 23:08 | Comment |

It’s been puzzling me since the start of the financial crisis: why can incontinent governments like, say, the UK’s, borrow almost unlimited amounts at interest rates far below inflation? Stephen King at HSBC has been thinking about this, and has come up with a suitably apocalyptic (he has a reputation to defend, after all) explanation for the silly prices of government debt.

Rather than addressing the problem of too much of it, he points out that governments across the West are instead finding ways to force it down the buyers’ throats regardless of the price. Sadly for the struggling members of the eurozone, they can’t pull off this trick because they don’t control their domestic currency, but the proud printers of other major currencies are pulling it off like mad. Read more

Floating Treasuries. Levitating Fed.

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Apr 11 2012 19:31 | Comment |

Let’s start with “Federal Reserve Independence Day“ – March 4, 1951.

Nowadays… when financial repression is all the rage, people seem more interested in what caused the Fed-Treasury Accord of that year, rather than what happened after. Read more

Why QE is being mis-sold

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Apr 04 2012 18:43 | Comment |

Ah, the elusive liquidity trap. Does it exist? Is it here? And what does it mean for monetary policy?

Those are critical questions which are not currently being addressed by policymakers, according to a new paper by Paul McCulley and Zoltan Pozsar, presented at the Banque of France on March 26. In fact, many policymakers, they say, are still under the mistaken belief that no such thing as a liquidity trap exists. Read more

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