LONDON | By Michael Gavin at Barclays | Today, we mainly remember the ‘Greenspan conundrum’ as a puzzle about the level of US interest rates in the several years leading up to the 2007-08 financial crisis. But the original conundrum was as much about the insensitivity of long-term interest rates to the tightening of monetary that began in mid-2004 as it was about the level of interest rates.
THE CORNER’S FRIDAY WRAP-UP | Buffet says that only Bernanke should take the Fed’s seat and Janet Yallen seems to be the best positioned candidate. But what if this is all a Fed’s manoeuvre?
BANGALORE | By Srikanth Vasuraj | Just a month ago the stock market collapsed and the Rupee fell to an all-time low. Now in just two days things seem to look up and everyone is smiling. What’s up?!
HAMBURG | By Dr. Beate Reszat | The BIS Triennial Central Bank Survey of foreign exchange turnover makes a fascinating read. First of all, there is the rise in turnover volume: $5.3 trillion. Per day. By comparison: World exports in 2011 (the latest available number) were about $17.8 trillion. Per annum. Second, there is the number of currencies traded which, as the following list shows, has increased markedly. The Mexican peso and Chinese renminbi are even found among the top 10 most traded currencies now.
NEW YORK | By Ana Fuentes | Fed officials surprised on Wednesday by deciding not to start trimming the $85 billion-a-month bond-buying program. “We can’t let market expectations dictate our policy actions,” Ben Bernake said, explaining that unemployment in the U.S. has not improved enough to cut stimulus. Reactions were immediate.
By Barry Knapp (Barclays) | There is a key difference from the surprisingly low volatility Septembers in 2009-12. In that period, the Fed was either buying assets or had pre-announced a new program; this year, it is preparing to weaken the portfolio balance effect. In our view, for equities to overcome unfavorable seasonality and another round of fiscal concerns, fundamentals, which have been mediocre for over a year, due primarily to weakening global and soft domestic growth, will have to improve considerably.
BEIJING | By Hong Hao via Caixin Magazine | The answers to how the Fed’s tapering will impact the market seem a little too obvious: the consensus is that tapering will jolt market interest rates substantially higher and thus provide headwinds for the market. Further, there is the belief that given China’s closed capital accounts, tapering will be inconsequential for its markets. I beg to differ.
The Corner Team via the Bank for International Settlements (BIS) | Japanese banks have recently become once again the biggest suppliers of cross-border bank credit, as they used to be in the 80s. The severe banking crisis of the 1990s, along with banking deregulation in the archipelago, reversed their expansion, the last BIS report points out. Their market share reached a low in 2007 before rebounding.
By Johannes Müller (Deutsche Asset & Wealth Management) | Fed’s tapering will be the beginning of a normalization of financial markets. The U.S. central bank is beginning to lift the foot off the accelerator, but it is unlikely that Bernanke and company will imminently step on the brake.
NEW YORK | By Ana Fuentes | In a less-than-140-characters tweet, Twitter announced its much-anticipated IPO on Thursday. The social network, which has over 200 million users, filed confidential paperwork so nobody really knows its value or how fast it’s really growing. Some analysts put its value at around $10 billion, others up to $16bn. All bets are on.