Sovereign debt
Richmond Fed paper examines sovereign debt duration
Working paper models trade-off between issuing shorter or longer-term debt; governments could be choosing the wrong durations by missing the ‘debt dilution’ problem
Paper finds global beats local in determining short-run sovereign bond spreads
Global factors tend to drive spread changes particularly during periods of severe market stress
Euro area bank lending restricted by sovereign debt exposure, say DNB researchers
There is a direct link between deteriorating creditworthiness of foreign sovereign debt and lending by banks holding such debt, according to a working paper from the Dutch central bank
Asian central bank FX reserves not properly recognised by rating agencies, says Sheng
CBRC adviser and former Hong Kong SFC chief Andrew Sheng points to inconsistent approach in sovereign debt ratings; doubts international crisis co-ordination is possible
Bank of Italy research finds evidence of investors ‘waking up’ to sovereign risk
Working paper suggests widening eurozone sovereign spreads caused by ‘complacent’ investors suddenly paying closer attention to risks
Bundesbank research says sovereign default can be the best option
Discussion paper finds it may be optimal to choose a costly default over legal repayment, but only when a country is facing disaster
IMF strikes €1 billion funding deal with Cyprus
Staff team agrees Fund’s contribution to overall bail-out package; Christine Lagarde praises Cyprus’s ‘ambitious’ programme of reforms
IMF urges ‘more forceful action’ to end Europe’s woes
Report on European financial stability says situation remains ‘tenuous’ in eurozone; calls on authorities to act fast to repair balance sheets and set up banking union
IMF research warns short-term fiscal consolidation pain could become more serious
Paper says short-term growth impact from fiscal tightening could be worsened if markets or policy-makers overreact; emphasises this does not mean budget cuts should be scrapped
Bank of Finland highlights ‘astonishing’ lack of information on Chinese government debt
Researcher warns opaque debt statistics are to China’s detriment and could threaten renminbi internationalisation; urges government to begin politically difficult process of improving transparency
ECB paper seeks to balance the arguments of eurosceptics
Researcher says sovereign debt crisis should be seen as a mix of many harmful factors rather than one single problem; offers optimistic view on the prospects for recovery
BIS paper urges policy-makers to consider co-ordinated bond strategy
Research finds effective response to a bond market crisis has become more difficult due to heavily laden central bank balance sheets, raising the need to better co-ordinate a crisis framework
IMF staff present mixed economic outlook following G-20 meeting
Report sounds note of cautious optimism as financial markets recover, but downside risks remain around the implementation of important policies in the US, Japan and Europe
ECB paper scrutinises fiscal multipliers in high-debt countries
Researchers assess impact of fiscal stimuli at different debt levels in Europe; caution that high debt levels may impair government’s ability to stimulate the economy
UK’s Adair Turner advocates stimulus by ‘helicopter money’
Chairman of the UK’s Financial Services Authority says there are circumstances where monetary financing of government deficits is justified, calling for more serious discussion of the topic
Hungary defies IMF to cut rates again
Central bank cuts rates in six consecutive meetings, despite IMF warning that inflation is not well contained and looser policy will do little to boost the economy
BoE paper finds impatience increases austerity costs
Discussion paper finds close link between a country’s time preference and its fiscal multiplier, implying that countries wanting a slower fiscal adjustment face higher costs to austerity
IMF research finds inflation targeting can dampen risk premiums
Working paper suggests inflation targeting reduces a country’s risk premium, although this effect is stronger for emerging markets and where inflation targeting is successful in stabilising prices
IMF sees southern European free-fall begin to slow
Mission chief for Greece says painful adjustment proceeding ‘apace’, although questions raised over potential €9.5 billion funding gap; Fund praises ‘impressive policy effort’ in Portugal
Fed’s latest Beige Book finds post-hurricane rebound
States that bore the brunt of Hurricane Sandy report improved conditions in all but the hardest-hit areas, as ‘modest or moderate’ growth continues; unemployment remains stubborn, however
Irish deputy governor says economy has ‘little safety margin’
Stefan Gerlach says while growth may show a modest recovery this year, even a small shock to market confidence could complicate an exit from the IMF programme
RBI seeks to draw retail investors into government securities
Deputy governor Harun Khan says tailoring government securities to retail investors will help cushion volatility created by institutional and international investors
IMF paper identifies trends in fiscal profligacy
Working paper analyses dataset of countries’ fiscal performance over time, finding an imperfect response to changes in the underlying economy
IMF fears Ireland could still lose access to markets
Eighth review of extended fund facility says Ireland’s newly regained market access is ‘fragile’ and could be lost if European commitments to ESM funding and OMTs are not followed through