China’s bond market faces buyer crisis 5 Jun 2018 A crackdown on off-balance sheet wheezes is likely to sap banks' appetite for bonds. They are by far the biggest buyers, so their retreat will hurt prices. Yield-hungry entrants might appreciate higher returns, but the coming liquidity drain could destabilise a rickety market.
Hadas: Market complacency curses debtor countries 31 May 2018 President Erdogan is wrong to claim a sinister “interest rate lobby” has aggravated Turkey’s structural weaknesses. Foolish foreigners have, however, financed unsustainable consumption binges in this and other economies. Remedies range from regulatory nudges to capital controls.
How the EU can help save Italy from itself 31 May 2018 A new radical government will cast doubt over euro membership and inflame migration tensions. Other EU countries could help ease voter discontent by tweaking the bloc’s fiscal rules, and taking more migrants. That won’t be easy, but it beats Italy leaving the single currency.
Dollar rally comes at exquisitely awkward time 30 May 2018 The greenback's recent strength creates a policy headache. If sustained, it’ll reheat real estate, pull capital from emerging markets and complicate Trump's attempts to push U.S. exports. And it’ll buttress the currency’s dominance despite rising doubts about the U.S. government.
Indonesia’s pre-emptive strike sends right signal 30 May 2018 Southeast Asia's largest economy has raised rates for the second time in two weeks. It sends a clear message that the new central bank governor Perry Warjiyo will put a steady currency first. Much of the 25-basis-point hike has been priced in, but timing and tone should reassure.
Only Italy can save itself from self-inflicted woe 29 May 2018 Investors are spooked by the prospect of a eurosceptic government pushing up debt, prompting an exit from the single currency. Contrary to 2011, Italy is the cause of the crisis, rather than a victim. A change of direction depends on voters, not the European Central Bank.
EU sovereign debt fix fails Italian test 24 May 2018 The European Commission wants to make it easier for investors to buy bonds that pool euro zone government debt. It’s part of a plan to reduce banks' exposure to indebted states. Recent Italian worries show such securities might help, but also why they are unlikely to work.
Turkey’s FX rot demands radical measures 23 May 2018 A massive one-off rate rise is the least it will take to halt the lira’s accelerating slide to new record lows against the dollar. Even then, investors might still fear President Tayyip Erdogan’s monetary policy meddling. Capital controls would then grow more likely.
Italy’s next economy minister is the one to watch 22 May 2018 Radical parties have proposed little-known academic Giuseppe Conte to head their government. Yet the economic portfolio matters more for the indebted country’s future. The new minister’s attitude towards the euro will go a long way towards determining investors’ faith in Italy.
Maduro election win will soon be his loss 17 May 2018 Securing another term as Venezuela’s president in Sunday’s poll is almost a foregone conclusion. But the country’s collapsing oil output may finally mean Nicolas Maduro’s days in power are numbered. Successors will face the mammoth task of rebuilding the economy he has trashed.
Local bureaucrats struggle to come clean in China 17 May 2018 Beijing is suppressing off-balance-sheet borrowing by regional governments, while new rules ease bond issuance. Yet the gap between their legal fundraising and fiscal obligations persists, hobbling efforts to cut a $2.6 trln debt pile. Mixed messages from the centre are to blame.
Clouds gather over Japan’s economy 16 May 2018 A 0.6 pct contraction ended a two-year growth streak. This is not in itself too worrying: quarterly data is volatile and economists had expected bad weather to dampen activity. But trade tensions, surging oil and domestic political strife present mounting challenges.
Macri risks IMF self-harm in search for stability 8 May 2018 Argentina’s president wants funding from the global lender as a further buttress against inflation and a run on the peso. It could help make reforms stick and provide an outsider to blame. But the country’s history with the IMF means it might also dim Macri’s political prospects.
Puerto Rico budget ignores the human element 27 Apr 2018 The bankrupt island’s federal oversight board certified plans that include cuts to pensions and other austerity measures. Some are in line with what Puerto Rico’s governor proposed. But they don’t adequately address the risk of yet more working-age people jumping ship.
ECB has big enough stick to repel bad-loan revolt 24 Apr 2018 A political backlash may force the European Central Bank to ditch plans for stricter provisioning of 760 bln euros of dud loans. The saga has weakened chief supervisor Daniele Nouy, and may delay reform of Europe’s banking union. But the ECB has other tools to cut the loan pile.
U.S. bond yields may be throwing investors a curve 23 Apr 2018 The difference between short- and long-term Treasury rates is the smallest since before the financial crisis, raising fears of a coming recession. Yet the yield curve is a flawed warning, sometimes flashing years before a downturn hits. There are far better things to worry about.
China’s surprise reserve cut exposes growth angst 17 Apr 2018 The central bank cut reserve requirements for banks, freeing $200 bln for lending. That backs up other moves to help over-stretched banks amidst a purge on loose credit. The timing, however, suggests Beijing is looking for a cushion if the economy slows, or a trade war escalates.
Zambia debt dispute undermines African credit 17 Apr 2018 The copper producer has denied it has dollar debt beyond its $8.7 bln of foreign borrowing. Its vague clarification comes two years after a $3 bln bond scandal in neighbouring Mozambique. Bilateral lending, particularly from China, is blurring the credit picture across Africa.
Brazil’s anti-graft drive may hamper fiscal reform 12 Apr 2018 The jailing of the country's most popular politician, Lula, and voter disgust at corruption among the powerful will give outsiders with clean reputations a chance to shine in October elections. That's welcome, but could mean needed spending cutbacks are less likely to happen.
Watch Singapore rate decision for trade war signal 12 Apr 2018 As one of the world’s most open economies, the city-state is caught in U.S.-China crossfire. Domestic growth is strong enough to encourage the central bank to tighten policy on Friday. A decision to stay neutral will hint at the damage that rate-setters expect tariffs to inflict.