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Reuters blog archive

from MacroScope:

ECB’s fingers crossed for private loans growth

Mostly bereft of policy options except for outright quantitative easing, European Central Bank President Mario Draghi hopes that hundreds of billions of euros more in cheap loans to banks will boost inflation.

The jury will be out for a long time before we get any decision on whether they have worked.

The first two rounds of cash, worth over one trillion euros and administered as an emergency shock treatment to a patient on the verge of breaking up, helped keep the euro zone alive. 

They were very successful in helping to push sovereign bond prices and stock prices higher, so averting fiscal disaster for several member states. After all, they were designed to create asset price inflation.

from Global Investing:

Emerging markets; turning a corner

Emerging markets have been attracting healthy investment flows into their stock and bond markets for much of this year and now data compiled by consultancy CrossBorder Capital shows the sector may be on the cusp of decisively turning the corner.

CrossBorder and its managing director Michael Howell say their Global Liquidity Index (GLI) -- a measure of money flows through world markets -- showed the sharpest improvement in almost three years in June across emerging markets. That was down to substantially looser policy by central banks in India, China and others that Howell says has moved these economies "into a rebound phase".

from Global Investing:

Liquidity needs to pick up in EM

Emerging markets have seen heavy selling in the past few months, with political and economic crises hitting the region's currencies and asset markets.

The obvious question now is: Is all the bad news in the price?

London-based CrossBorder Capital, who publishes monthly liquidity and risk appetite data for developed and emerging economies, thinks not.

from MacroScope:

A question of liquidity

The Federal Reserve’s decision to keep printing dollars at an unchanged rate, mirrored by the Bank of Japan sticking with its massive stimulus programme, should have surprised nobody.

But markets seem marginally discomfited, interpreting the Fed’s statement as sounding a little less alarmed about the state of the U.S. recovery than some had expected and maybe hastening Taper Day. European stocks are expected to pull back from a five-year high but this is really the financial equivalent of “How many angels can dance on the head of a pin”. The Fed’s message was little changed bar removing a reference to tighter financing conditions.

from MacroScope:

Time to taper the taper talk?

It's been three months since the Federal Reserve first hinted that it's going to have to ease off on its extraordinary monetary stimulus, but financial markets are still not settled on the matter.

But while volatility is on the rise - surely partly a result of thinned trading volumes during the peak summer vacation season - the consensus around when the Fed will start cutting back hasn't budged.

from Expert Zone:

Sooner the better for RBI to unwind grip on liquidity

(Any opinions expressed here are those of the author and not of Reuters)

The Reserve Bank of India (RBI) wasn't expected to do anything new at its policy review on Tuesday and it did exactly that. But the markets still reacted adversely. The stock market moved in consort with the rupee with the Sensex falling 245 points.

It is generally true that markets overreact, more so in India, partly because market sentiment is affected far too quickly. What evoked these sentiments was the undue concern expressed by RBI Governor Duvvuri Subbarao about external uncertainties, more so about quantitative easing by the U.S. Federal Reserve and food inflation in India.

from Expert Zone:

How the RBI’s recent measures affect you

(Any opinions expressed here are those of the author and not of Reuters)

Banking is the backbone for growth in large economies such as India. Banks provide short-term finance to trade, industry and agriculture while also ensuring excess money is channelized into productive assets via deposits and financial intermediation.

Banks have to work under the stipulated policies of the central bank with respect to deposit mobilisation and lending for which they need to maintain minimum cash balances and government securities.

from Breakingviews:

China bank rout favours big lenders over small

By John Foley

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

A pledge of support for cash-strapped lenders should take the fear out of China’s interbank market. After two weeks of spiking rates, the People’s Bank of China (PBOC) said on June 25 it had extended liquidity to some lenders, and would stand ready to help others. Its new stance will most benefit those in least need: China’s big banks.

from Breakingviews:

China’s liquidity non-problem could turn ugly

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A thin sliver of “ultimate liquidity” is supporting a vast edifice of private-sector debt obligations in China. That structure is unstable.

from MuniLand:

As trading activity declines, new routes to liquidity emerge

Municipal bond trading volumes are on a downward march. The Municipal Securities Rulemaking Board (MSRB), which oversees muniland, publishes trade statistics on its website. You can see on the chart below, which shows daily trade volumes, how “customer bought” trades especially have been trending down. These are trades done by retail and institutional clients to acquire bonds.

“Customer sold” trades, which generally represent funds or brokers selling bonds out of client accounts to be replaced with other bonds, have been relatively steady. Bonds are sold to raise cash and to move assets to other classes. Interdealer trades are done between dealers to transfer bonds that are sold onto clients who are not dealers (think retail and institutional investors).

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