Sovereign debt
Eurogroup calls emergency conference as Greece turns to ESM for help
Greece asks for two-year bailout programme from European Stability Mechanism, triggering yet another emergency Eurogroup meeting; ECB’s Cœuré admits exit from the euro is now possible
ECB’s Constâncio calls for eurozone to cut back on debt
ECB vice-president says deleveraging has proceeded slowly so far due to growth concerns; emphasises debt reduction ought to be done using diverse measures, but says primary surpluses are key
EU court rules OMTs are legal
ECB is vindicated as ECJ rules in favour of crisis measure that would see the central bank buy potentially unlimited amounts of sovereign debt to protect ‘singleness’ of monetary policy
Weidmann sees bond reversal as ‘a kind of re-normalisation’
Bundesbank president argues sell-off is a ‘correction of market overshooting’ in the wake of ECB asset purchases; insists volatility is ‘not exceptionally high’ at present
Fed taper could hit African sovereign credits hard, World Bank warns
Cross-continent trade agreement could help provide bigger markets and greater efficiencies, but African economies face tough times ahead with borrowing costs set to rise
Economists expect last-minute Greek deal
With Greek finances still looking close to collapse, Central Banking asks a group of economists what the consequences of a last-minute agreement or default might be
Draghi warns high volatility here to stay
Government bond yields continue to climb as Draghi says ‘we should get used to periods of higher volatility’ with interest rates on the floor; ECB keeps policy unchanged
IMF researchers highlight high cost of unnecessary fiscal consolidation
For countries with very low borrowing costs, allowing debt ratios to fall ‘organically’ via growth is likely to be less damaging to the economy than harsh austerity, authors say
Hungarian central bank to adopt new policy rate
From September it will use the rate on a new deposit facility with a longer maturity, to encourage banks to park funds with the government instead of the central bank
Euro tumbles as ECB accelerates asset purchases
Euro slides against the dollar as market reacts to ECB’s plan to ‘moderately front-load’ its asset purchases; Cœuré concerned by ‘rapidity’ of price reversal in sovereign bonds
Bank of Canada plans changes to operating framework
Changes would see Canadian central bank cut back on purchase of government bonds through primary market, while intervening less frequently in overnight market
BoJ paper finds QQE has not ‘significantly’ damaged bond market liquidity
Researchers compile set of liquidity indicators, finding that while government bond market liquidity has not declined significantly, it has been on a downward trend since easing was ramped up
BIS economists say investor behaviour key to understanding EM challenges
Hyun Song Shin and Philip Turner consider implications of shift in financial intermediation for emerging markets; part of wider Banque de France review on the subject
Spanish paper analyses financial innovation in sovereign debt
Working paper published by the Bank of Spain studies how financial innovation in sovereign debt markets can increase a country’s level of private investment and welfare
Varoufakis defends reshaped Greek reform agenda
Greek finance minister says extension bought time for a ‘serious conversation’ with creditors and outlines ways in which he wants reforms to differ from troika prescriptions
Danish annual report highlights move into equities
National Bank of Denmark implemented new investment strategy in 2014, adding riskier assets including equities and lower-rated government bonds to reserves
ESRB group wants treatment of sovereign debt reviewed
Report published by European Systemic Risk Board argues sovereign debt can no longer treated as risk-free, and outlines different ways the regulatory framework could be adapted
Colombian paper analyses relationship between term premia in US and Latin America
Brazil and Colombia are the Latin American countries with the largest responses to changes in the US term premium, according to research published by the Central Bank of Colombia
Are central banks the ‘Figaro’ of the financial markets?
Central banks continue to play a vital position in the functioning of markets. While this raises significant concerns about moral hazard it is not an unfamiliar role from an historical perspective
Book notes: Sovereign debt management, by Rosa María Lastra and Lee Buchheit
An immensely valuable compilation of contributions by lawyers and several economists on sovereign debt. This book is eminently readable, in spite of its difficult subject matter
BoJ nominee Harada: monetary stimulus, fiscal discipline
A review of Yutaka Harada’s published papers and articles reveals the Bank of Japan Policy Board nominee is likely to favour more stimulus from the central bank and less from the government
IMF calls for reform at Madagascar central bank
Staff report says central bank needs greater independence and stronger oversight mechanisms; new audit committee on the way and government agrees to recapitalise institution
Government spend no more effective at ZLB – NBER paper
US government spending did not become more powerful when monetary policy hit a zero lower bound, according to a working paper published by the National Bureau of Economic Research
Linde fears ‘revival’ of debt sustainability concerns
Concerns about the sustainability of European sovereign debt have not disappeared and could be reactivated if the economic conditions worsen, says Linde