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Tag Archives: bonds

A Capital Market Union for Europe: Why it’s Needed and How to Get There

By Ashok Vir Bhatia, Srobona Mitra, and Anke Weber When savers and firms invest and borrow beyond their national borders, they enjoy opportunities to diversify their portfolios and lower their funding costs, respectively. In Europe, this idea—of an integrated financial system that offers a richness of financing choice—remains an elusive goal: capital markets are far from integrated. Our recent research finds that European finance is still sharply segmented along national lines, with...

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An Imbalance in Global Banks’ Dollar Funding

By John Caparusso, Yingyuan Chen, Hideo Hashimoto, David Jones, Will Kerry and Aki Yokoyama June 12, 2018 Versions in Español, Deutsche, Français, 日本語, Português The US Treasury is issuing more T-bills, potentially putting upward pressure on the interest rates non-US banks must pay for short-term dollar funding (photo: Jennifer Hack/KRT/Newscom) For companies and investors outside the United States, the dollar is often the currency of choice. Surprisingly, though, US banks play only a...

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The Broader View: The Positive Effects of Negative Nominal Interest Rates

By Jose Viñals, Simon Gray, and Kelly Eckhold Version in Deutsch (German) We support the introduction of negative policy rates by some central banks given the significant risks we see to the outlook for growth and inflation. Such bold policy action is unprecedented, and its effects over time will vary among countries. There have been negative real rates in a number of countries over time; it is negative nominal rates that are new. Our analysis takes a broad view of recent events to examine...

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The Specter of Risk in the Derivatives of Bond Mutual Funds

Current regulations only require U.S. and European bond mutual funds to disclose a limited amount of information about the risks they have taken using financial instruments called derivatives. This leaves investors and policymakers in the dark on a key issue for financial stability.  Our new research in the October 2015 Global Financial Stability Report looks at just how much is at stake.  A number of large bond mutual funds use derivatives—contracts that permit investors to bet on the...

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Are Capital Flows Expansionary or Contractionary? It Depends What Kind

By Olivier Blanchard, Jonathan D. Ostry, Atish R. Ghosh, and Marcos Chamon With the expected move by the Federal Reserve to raise interest rates before the end of the year, many are asking about the effects on emerging market countries. Will outflows increase, and how will this affect economic activity in emerging markets? To answer that, we need to know if capital inflows are in general expansionary or contractionary. One would think that the question was settled long ago. But, in fact, it...

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