Sovereign debt
Germany needs structural surplus, Weidmann says
Bundesbank president counters arguments Germans are saving too much; says treatment of eurozone sovereigns must change, at odds with Bank of Italy governor
Ugandan deputy calls for caution in forecasting deficits
Louis Kasekende warns inflation could be threatened if governments lose access to the market and are unable to meet their borrowing requirements, turning to the central bank instead
Visco wary of changing regulation on sovereign exposures
Italian governor acknowledges sovereign exposures are not risk-free, but questions logic to changing prudential rules
ECB paper models influence of financial fragmentation on eurozone crisis
Working paper published by ECB models the influence of financial fragmentation on three key stages in the eurozone crisis
RBI deputy outlines ‘key tasks’ for market development
Harun Khan lays out the main areas of work in broadening financial markets, including efforts to improve liquidity and access and improving central bank communication around debt management
Kuroda: Negative rates having ‘visible’ impact on JGB yields
Bank of Japan governor Haruhiko Kuroda says rates are falling across the yield curve, falling negative up to a maturity of “around” 10 years; sees effects spreading in future
Stressed governments persuade banks to increase bond buying, paper finds
European governments under fiscal stress persuaded domestic banks to increase their holdings of sovereign debt, a paper from The Netherlands Bank finds
Denmark focuses on long-dated issuance amid low rates
National Bank of Denmark’s 2016 debt issuance strategy uses long maturities to reduce interest rate risk as low rates hold down costs; return to more normal footing after last year’s suspension
Book notes: Debtonator, by Andrew McNally
A lucid book questioning society’s bias towards debt and against equity
Fiscal dominance can invert transmission mechanism, Lahiri and Patel find
Authors show ‘statutory liquidity requirement’ and fiscal dominance can invert the effects of monetary policy or render it impotent; suggest ‘rebalancing’ India’s reform agenda
Rajan flags pitfalls of short-term thinking
RBI governor extols the virtues of macroeconomic stability, defending the central bank’s strict stance on inflation and calling on the government to stick to its fiscal consolidation plans
Haircuts on sovereign debt ‘open the door for more leverage’, research finds
Prolonged low interest rates also contribute to an overleveraged economy in case of crisis; though in times of ‘low crisis’ they can help decelerate fiscal adjustment
ECB paper quantifies spillover from sovereign to corporate credit risk
Research studies direct spillover effects using credit default swaps and data on 226 firms from 15 European countries in aftermath of first Greek bail-out
Hungarian central bank eases by scrapping deposit facility
The central bank announces the closure of its two-week deposit facility in April, in a move it hopes will lead banks to buy government bonds and lower long-term yields
RBI sheds new light on debt management strategy
Central bank unveils more detailed approach to communicating debt management plans, laying out a medium-term strategy that will be updated each year
Bank of Japan tweaks QQE with maturity extension and new ETF purchases
BoJ will continue to buy 80 trillion yen worth of JGBs a year, but with slightly longer to run to maturity; announces new ETF programme to offset sales of old stocks
Paper explores whether governments prefer under-capitalised banks in crises
Governments may prefer banks to be weakly capitalised as this increases the likelihood they will act as buyers of last resort for domestic debt; paper considers impact on regulation
Eurosystem’s asset purchase programme should increase growth by 1% annually, paper says
The Eurosystem’s asset purchase programme could increase growth and inflation by 1% annually for two years, a working paper from the Bank of Italy predicts
Central banks should prepare to deal with sharp drops in liquidity, IMF says
Policy-makers need to take action to halt rising risks relating to liquidity, IMF says; central banks may be able to use collateral policies to deal with crises
BoE’s Shafik sees scope for reducing sovereign spillovers
Policies are available that could help reduce the risk of ‘disorderly spillovers’ between sovereigns, with lessons to be learned from the lender-of-last-resort function, deputy governor says
BIS reveals new data output in review
Bank for International Settlements expands data around international banking, government debt and private debt service ratios; launches new bulletin and online exploration tool
European supervisors flag rising liquidity risks
Supervisors raise concerns over growing market liquidity risks, warning of the combined impact of technology, regulation and competition; asset managers a potential source of contagion
IMF paper challenges idea of debt threshold effect
Countries with high levels of public debt can grow just as fast as their peers, provided the debt is on a downward trajectory, research finds
BoJ predicted to expand QQE, within limits
Analysts are predicting the Bank of Japan will increase asset purchases next month, but researchers are warning of speed bumps ahead