Editor, Investment Strategy. Europe, Middle East and Africa, London
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Oct 8, 2012
via Global Investing

Fears of collateral drought questioned

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Have fears of global shortage of high-grade collateral been exaggerated?

As the world braces for several more years of painful deleveraging from the pre-2007 credit excesses, one big fear has been that a shrinking pool of top-rated or AAA assets — due varioulsy to sovereign credit rating downgrades, deteriorating mortgage quality, Basel III banking regulations, central bank reserve accumulation and central clearing of OTC derivatives — has exaggerated the ongoing credit crunch. Along with interbank mistrust, the resulting shortage of high-quality collateral available to be pledged and re-pledged between banks and asset managers,  it has been argued, meant the overall amount of credit being generating in the system has been shrinking,  pushing up the cost and lowering the availability of borrowing in the real economy. Quantitative easing and bond buying by the world’s major central banks, some economists warned, was only exaggerating that shortage by removing the highest quality collateral from the banking system.

But economists at JPMorgan cast doubt on this. The bank claims that the universe of AAA/AA bonds is actually growing by around $1trillion per year.  While central bank reserve managers absorb the lion’s share of this in banking hard currency reserves,  JPM reckon they still take less than half of the total created and, even then, some of that top-rated debt does re-enter the system as some central bank reserve managers engage in securities lending.

Oct 8, 2012
Oct 5, 2012

What if a post-election Fed were shackled?

LONDON (Reuters) – Investors staring squarely at the U.S. fiscal cliff may well be ignoring a bigger monetary policy pitfall.

Many asset managers are puzzled at the how little attention world markets seem to have paid to the U.S. Republican party’s stiff criticism of the hyper-active Federal Reserve and its successive bouts of reflationary money printing since 2008.

Oct 5, 2012
Oct 3, 2012

‘Critical but stable’ world nods at more risk

LONDON (Reuters) – Like a patient in a critical but stable condition, the world economy may be in for years of low, spluttering growth and yet a lack of volatility may be acting as a green light for investors.

The paralysing effect of economic uncertainty on investment, business and household planning has been stark over the past five years of credit crisis and the deep and synchronised global recession of 2008/2009 is seared into many minds.

Oct 3, 2012

Analysis: “Critical but stable” world nods at more risk

LONDON (Reuters) – Like a patient in a critical but stable condition, the world economy may be in for years of low, spluttering growth and yet a lack of volatility may be acting as a green light for investors.

The paralyzing effect of economic uncertainty on investment, business and household planning has been stark over the past five years of credit crisis and the deep and synchronized global recession of 2008/2009 is seared into many minds.

Oct 1, 2012
Sep 28, 2012

Tug of war into Q4

LONDON, Sept 28 (Reuters) – Take on a little risk,
maybe, but not too much.

This extraordinary lack of conviction among global investors
about the remainder of 2012 illustrates just how unpredictable
the investment horizon has become in the “tug of war” between
unprecedented stimuli from the world’s big central banks and the
chronic drag of a deep-seated global debt hangover.

Sep 28, 2012

Cautious funds tip-toe back to euro stocks – Reuters poll

LONDON (Reuters) – Global investors staged a tentative return to euro zone stocks and bonds this month following the European Central Bank’s bond-buying rescue plan and credit easing from the U.S. and Japanese central banks, a Reuters poll showed on Thursday.

Yet even though synchronised central bank interventions saw cash holdings cut to their lowest since April, the survey of 61 funds in the United States, continental Europe, Britain and Japan showed only a selective return to risky assets.

Sep 25, 2012
    • About Mike

      "Mike Dolan is Reuters' Investment Strategy Editor in Europe. He has been a correspondent and editor for the past 20 years, working for Reuters from London and Washington DC in a variety of roles covering global policymaking, economics and investment trends."
      Joined Reuters:
      1995
      Awards:
      Reuters Editor of the Year, 2009. Reuters multimedia journalist of the year award, 2011
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