Corporate bonds – Welcome Echizenshi http://welcome-echizenshi.com/ Fri, 17 Sep 2021 23:19:40 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://welcome-echizenshi.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Corporate bonds – Welcome Echizenshi http://welcome-echizenshi.com/ 32 32 Dig into quality with the vaunted SPHQ https://welcome-echizenshi.com/dig-into-quality-with-the-vaunted-sphq/ https://welcome-echizenshi.com/dig-into-quality-with-the-vaunted-sphq/#respond Fri, 17 Sep 2021 22:31:01 +0000 https://welcome-echizenshi.com/dig-into-quality-with-the-vaunted-sphq/ Af junkie stocks led the cyclical rise in value earlier this year, quality stocks are getting a second look, which has positive implications for exchange-traded funds, such as the Invesco S&P 500 Quality ETF (NYSEArca: SPHQ). The truth is, quality stocks rarely go out of style. After all, what’s wrong with stocks with impressive ROE, […]]]>

Af junkie stocks led the cyclical rise in value earlier this year, quality stocks are getting a second look, which has positive implications for exchange-traded funds, such as the Invesco S&P 500 Quality ETF (NYSEArca: SPHQ).

The truth is, quality stocks rarely go out of style. After all, what’s wrong with stocks with impressive ROE, accumulation ratio, and leverage ratio – the metrics used by the S&P 500 Quality Index, the S&P 500 Index of SPHQ’s underlying benchmark.

This straightforward approach is relevant to investors because more than any other investment factor, the way the investment community views quality is fluid. With SPHQ, investors benefit from an accessible and easy-to-understand approach.

“Quality measures are popular in the investment practitioner community, but no standard definition of the quality factor has been agreed upon. In contrast, factors such as value and size have clear and accepted definitions. Although there is an abundant literature devoted to a few specific facets of quality, some facets used in practitioner definitions have not been explored very much in the academic literature, ”according to an article in the Financial Analysts Journal written by Jason Hsu, Vitali Kalesnik and Engin. Kose.

SPHQ an Exclusive Club

As noted above, SPHQ tracks an S&P 500 derivative benchmark. That doesn’t mean investors can buy an S&P 500 index fund and get a huge dose of quality stocks. In fact, the opposite may be true because the SPHQ is an exclusive territory, home to only 102 of the 500 plus members of the S&P 500.

Interestingly, it can be argued that quality, although it is an individual factor, is actually a multifactorial concept.

“The main quality index products offer a set of heterogeneous attributes linked by the theme of financial and accounting quality. There is no evidence that these variables represent a single homogeneous source of risk or a single anomaly. Therefore, quality indices are interpreted more appropriately as multi-factor portfolios whose main commonality is that they are mostly constructed from lesser known and less verified corporate characteristics, ”note Hsu, Kalesnik and Kose.

What the researchers mention is not surprising. Quality is often confused with low volatility and a look at SPHQ’s lineup reveals an almost even split between growth and value stocks.

Given the vagueness surrounding the definition of quality, some investors may find it easier to focus on quality at the sector level. SPHQ obliges. For example, the fund is allocated lightly to the names of Energy and Real Estate, two capital intensive groups. Conversely, the Invesco fund allocates more than 37% of its weighting to technology stocks.

For more news, information and strategies visit the ETF Education channel.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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Harbor launches two new ETFs based on scientific method https://welcome-echizenshi.com/harbor-launches-two-new-etfs-based-on-scientific-method/ https://welcome-echizenshi.com/harbor-launches-two-new-etfs-based-on-scientific-method/#respond Fri, 17 Sep 2021 13:15:23 +0000 https://welcome-echizenshi.com/harbor-launches-two-new-etfs-based-on-scientific-method/ Harbor Funds yesterday launched two new ETFs, one targeting fixed income and the other focused on high yield, both using a proprietary model based on the science method. The Harbor Scientific Alpha Income ETF (SIFI) uses a fixed income investment approach based on the scientific method. It is an actively managed fund that seeks to […]]]>

Harbor Funds yesterday launched two new ETFs, one targeting fixed income and the other focused on high yield, both using a proprietary model based on the science method.

The Harbor Scientific Alpha Income ETF (SIFI) uses a fixed income investment approach based on the scientific method. It is an actively managed fund that seeks to limit downside risk while maximizing total return. Its benchmark is the Bloomberg Barclays US Aggregate Bond Index.

The fund invests primarily in fixed income instruments and derivatives, including credit default swaps, US Treasury futures and other ETFs to manage exposures. The fund may also invest in below investment grade corporate bonds, also known as “high yield” or “junk” bonds, including futures and swaps, as well as emerging market bonds.

The sub-advisor, BlueCove Limited, calculates whether a bond is rated below investment grade by averaging the bond’s Moody, S&P and Fitch ratings.

The sub-advisor uses scientific alpha to generate returns, which is defined as a process by which it uses proprietary quantitative models to create investment recommendations which are then compared against historical market data to verify the recommendations or hypotheses. This back-testing includes internal peer review, specific research parameters and analysis, including a company’s strength, outlook and credit spreads.

The sub-advisor also analyzes market timing to determine how attractive the credit and interest rate markets are and draws data sources such as issuer-specific and macroeconomic information, not just cash flow. of the company, earnings expectations and the risk of default.

Most of the fund’s total returns are expected to come from coupon income and asset allocation choices. The concentration risk is limited by the exposure capping for single issuer and single issue positions on the basis of internal limits.

SIFI does not invest in bonds of a particular maturity or duration and does not have an overall maturity range for the portfolio. The fund has an expense ratio of 0.50%.

The Harbor Scientific Alpha High Yield ETF (SIHY) uses an actively managed investment approach that is based on the scientific method. It seeks to provide risk-adjusted returns relative to its benchmark, the ICE BofA US High Yield Index.

The fund invests in below investment grade corporate bonds, also known as “high yield” or “junk” bonds, including futures and swaps. The sub-advisor, BlueCove Limited, calculates whether a bond is rated below investment grade by averaging the bond’s Moody, S&P and Fitch ratings.

SIHY invests primarily in securities denominated in US dollars, but the derivatives in which it may invest include credit default swaps and futures contracts on the US Treasury, as well as other ETFs to balance exposures.

The sub-advisor uses scientific alpha and market timing to generate returns in the same way it does for SIFI.

Most of the fund’s total returns are expected to come from high yield bond security selection. The concentration risk is limited by the exposure capping for single issuer and single issue positions on the basis of internal limits.

SIHY does not invest in bonds of a particular maturity or duration and does not have an overall maturity range for the portfolio. The fund has an expense ratio of 0.48%.

For more news, information and strategy, see ETF Trends.


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BlackRock Core Bond (BHK) falls 0.64% on September 16 https://welcome-echizenshi.com/blackrock-core-bond-bhk-falls-0-64-on-september-16/ https://welcome-echizenshi.com/blackrock-core-bond-bhk-falls-0-64-on-september-16/#respond Fri, 17 Sep 2021 01:39:00 +0000 https://welcome-echizenshi.com/blackrock-core-bond-bhk-falls-0-64-on-september-16/ Last prize $ Last trade Switch $ Percentage of change % Open $ Previous Close $ High $ moo $ 52 weeks high $ 52 weeks low $ Market capitalization P / E ratio Volume To exchange BHK – Market data and news To exchange Shares of BlackRock Core Bond Trust (NYSE: BHK) fell 0.64%, […]]]>

Shares of BlackRock Core Bond Trust (NYSE: BHK) fell 0.64%, or $ 0.11 per share, to close Thursday at $ 17.11. After opening the day at $ 17.23, shares of BlackRock Core Bond have fluctuated between $ 17.28 and $ 17.04. 76,819 shares traded in hands, down from their 30-day average of 158,634. Thursday’s activity brought the market cap of BlackRock Core Bond to $ 922,830,006.

BlackRock Core Bond is headquartered in Wilmington, Delaware.

About BlackRock Core Bond Trust

The investment objective of BlackRock Core Bond Trust (BHK) (the “Trust”) is to provide current income and capital appreciation. The Trust seeks to achieve its investment objective by investing at least 75% of its assets in high quality bonds at the time of investment. The Trust’s investments will include a wide variety of bonds, including corporate bonds, US government and agency securities, and mortgage-related securities. The Trust may invest in these securities directly or synthetically through derivative instruments.

Visit the BlackRock Core Bond Trust Profile for more information.

About the New York Stock Exchange

The New York Stock Exchange is the largest stock exchange in the world in terms of market value with more than $ 26 trillion. It’s also the leader in initial public offerings, with $ 82 billion raised in 2020, including six of the seven biggest tech deals. 63% of PSPC proceeds in 2020 were raised on the NYSE, including the six biggest deals.

To get more information about BlackRock Core Bond Trust and keep up with the latest company updates, you can visit the company profile page here: BlackRock Core Bond Trust Profile. For more information on the financial markets, be sure to visit Equities News. Also, don’t forget to sign up for the Daily Fix to get the best stories delivered to your inbox 5 days a week.

Sources: The chart is provided by TradingView based on 15 minute lag prices. All other data is provided by IEX Cloud as of 8:05 p.m. ET on the day of publication.

DISCLOSURE:
The views and opinions expressed in this article are those of the authors and do not represent the views of equities.com. Readers should not take the author’s statements as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please visit: http://www.equities.com/disclaimer


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The database of the external wealth of nations https://welcome-echizenshi.com/the-database-of-the-external-wealth-of-nations/ https://welcome-echizenshi.com/the-database-of-the-external-wealth-of-nations/#respond Thu, 16 Sep 2021 13:59:41 +0000 https://welcome-echizenshi.com/the-database-of-the-external-wealth-of-nations/ What does the Outer Wealth of Nations (EWN) measure? The EWN provides estimates of the external financial assets and liabilities of each country. These data also provide estimates of each country’s net international investment position (NIIP), the difference between its total external financial assets and its total external liabilities. What are external financial assets and […]]]>

What does the Outer Wealth of Nations (EWN) measure?

The EWN provides estimates of the external financial assets and liabilities of each country. These data also provide estimates of each country’s net international investment position (NIIP), the difference between its total external financial assets and its total external liabilities.

What are external financial assets and liabilities?

External financial assets are the claims of national residents on non-residents, consisting of:

  • foreign direct investment (control of the holdings of national companies in foreign subsidiaries);
  • portfolio investments (holding by national residents of shares or bonds issued by non-resident entities);
  • other investments (including loans or deposits with non-resident entities, trade credits, etc.);
  • financial derivatives;
  • foreign exchange reserves (holding of liquid assets in foreign currency by the national central bank).

Financial liabilities are defined in a similar fashion (with the exception of foreign exchange reserves — any liability of the central bank vis-à-vis non-residents is classified in the category of liability corresponding to the nature of this liability). For example, if an American company has a controlling interest in an Irish company domiciled in Ireland, this is an external asset of the United States and an external liability of Ireland. Likewise, if an Irishman owns shares in an American company, it is an external asset of Ireland and an external liability of the United States.

In accordance with balance of payments statistics conventions, external assets and liabilities are defined on the basis of residence, not Nationality. For example, a branch of a US bank in the UK is a UK resident, while a branch of a Canadian bank in the US is a US resident. Therefore, a deposit from a US resident in the former is an external asset (and therefore included in the EWN data), while a deposit in the latter is a domestic asset (and therefore not included).

What can the data tell us?

Data on the world economy as a whole provide a measure of trends in international financial integration and global external imbalances. Country by country, data

provide a measure of an economy’s financial links with the rest of the world. A country’s NIP tells us whether it is a creditor or debtor of the rest of the world, which may have implications for the sustainability of external debt.

Does the EWN database measure a country’s wealth?

No. The data only measure financial claims and liabilities to non-residents, and therefore only the net external component of a country’s wealth. In particular, the data does not include wealth held nationally by residents of a country.

In fact, a country’s PNI and its overall wealth can evolve in opposite directions. For example, an increase in the stock prices of a country will increase the value of national wealth, as domestic companies are worth more. At the same time, to the extent that some of a country’s stocks are held by non-residents, this will also increase a country’s financial liabilities to non-residents, and hence worsen the NIP.

What are the most prominent trends that the data show over the past decade?

Before the global financial crisis of 2007-2008, there had been a strong expansion of cross-border positions which faded after 2007 (see Lane and Milesi-Ferretti, 2018). This slowdown mainly reflects the weakness of capital flows to and from advanced economies, with reduced activity of the big banks and a return to fragmentation of euro area bond markets following the euro area crisis of 2010-11 .[1] A composition effect was also at play: the share of global GDP represented by emerging and developing economies increased sharply. For these economies, external assets and liabilities represent a lower share of GDP compared to advanced economies, which lowers the aggregate.

As other forms of cross-border financing contracted after the global financial crisis, global FDI increased sharply as multinational companies expanded their network of affiliates abroad. This expansion partly reflected entirely new investments (i.e. new production facilities as opposed to the acquisition of existing facilities or the creation of purely financial entities), but a significant source of expansion was the proliferation of special purpose vehicles (intermediary financial entities with no significant economic footprint) domiciled in financial centers, designed for regulatory and tax minimization reasons. (For more details, see Lane and Milesi-Ferretti, 2018, “The External Wealth of Nations Revisited: International Financial Integration in the Aftermath of the Global Financial Crisis”, IMF Economic Review 66, 189-222).

The past decade has also seen a further expansion of the global positions of creditors and debtors, as described here. In other words, the group of creditor regions (some advanced European countries, advanced Asian economies, major oil exporters, as well as China) accumulated additional net foreign assets and the group of debtor regions (mainly the United States but also certain advanced European countries, emerging economies in Europe, Latin America and emerging Asia) additional net external liabilities.

Who are the biggest debtor and creditor countries in the world?

EWN table 1

What can the external wealth of nations tell me about a particular country?

Take the example of Canada, a country that has been a net debtor for most of the past 50 years, recording virtually uninterrupted current account deficits between 1971 and 1998. After recording a series of current account surpluses starting in 1999, its position net external debtor had been reduced. at -9% of GDP by the end of 2008, with a modest credit position in FDI and portfolio equity instruments and a slightly more investor net liability position). Since 2009, Canada has again recorded current account deficits, with a cumulative value of US $ 567 billion (roughly 35% of 2020 GDP). Funding was primarily through net inflows of debt, with modest net outflows in portfolio equities and FDI.

Despite its initial debt position and this additional borrowing, statistics from the PEG show that Canada has become a large net creditor by 2020, with a net asset position exceeding 60% of GDP. How did it happen?

Canadian equity investors overseas fared very well: Global U.S. dollar stock prices rose 185% between 2008 and 2020, boosting the valuation of Canadian portfolio stocks and corporate assets. FDI abroad. But Canadian equity markets were much less dynamic, reflecting the less encouraging performance of energy and metals: prices rose 80% in US dollars. As a result, Canada’s net creditor position in FDI and equity instruments is now close to 120% of GDP (while at unchanged valuations of equities it would be around 23% of GDP). At the same time, the continued attractiveness of the Canadian bond market has attracted safe haven flows, and its net position in portfolio debt instruments is now around -50 percent of GDP.[2]

Where can I find your most recent analysis of this data?

The September 2021 analysis is available here. See also our recent discussion on the US international investment position.

Where do the data for the Outer Wealth of Nations come from?

The main sources of data are the balance of payments (BOP) and international investment position (IEP) statistics of each country, released by the International Monetary Fund. The only conceptual difference is that our data excludes central bank holdings of gold from financial assets (since they do not constitute a claim on another country).

EWN data extends both time series and national coverage of IIP statistics to include virtually all economies in the world from 1970 onwards, using data and alternative methods to fill gaps in IIP data or when IIP estimates may be incomplete or imprecise. . Regarding time series coverage, IIP data for India starts in 1996, for Brazil in 2001 and for China in 2004. And for country coverage, the EWN database includes economies such as Kuwait, Qatar, United Arab Emirates and several Caribbean offshore centers (such as Bermuda, British Virgin Islands and Cayman Islands) that do not publish IIP statistics or publish an incomplete version (excluding of the main sovereign wealth fund for Kuwait and excluding most of the offshore sector for Bermuda and the Cayman Islands).

These extended statistics are based on a variety of data sources, including partner country bilateral data from the IMF’s Coordinated Direct Investment Survey and the IMF’s Coordinated Portfolio Investment Survey (for countries that do not publish estimates of their external assets and liabilities, or publish only an incomplete version); cumulative flows with value adjustments; World Bank and IMF statistics on external debt; UNCTAD statistics on foreign direct investment; and various national sources. Useful entries for historical data are also provided by a book by Stefan Sinn (“Net External Asset Positions of 145 Countries,” Kieler Studien no. 224, Institut für Weltwirtschaft an der Universität Kiel, Tübingen: JCB Mohr).

If I am using this dataset, how should I assign it?

Please cite this link, as well as Lane, Philip R. and Gian Maria Milesi-Ferretti, 2018, “The External Wealth of Nations Revisited: International Financial Integration in the Aftermath of the Global Financial Crisis”, IMF Economic Review 66, 189-222 .


[1] The cross-border activity of banks was mainly captured in the “other investment” category, which includes loans and deposits.

[2] Changes in exchange rates are also important. Canada’s liabilities are predominantly denominated in domestic currency, while a significant portion of its assets are denominated in foreign currency (mainly US dollars). Thus, a depreciation of the Canadian dollar against the US dollar tends to improve Canada’s international investment position by increasing the value in national currency of Canadian assets abroad. At the end of 2020, the Canadian dollar was 5% lower than at the end of 2008 against the US dollar.


The Brookings Institution is funded through the support of a wide range of foundations, corporations, governments, individuals, as well as an endowment. A list of donors is available in our annual reports published online here. The results, interpretations and conclusions of this report are those of its author (s) and are not influenced by any donation.


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How to use the wealth shortlist https://welcome-echizenshi.com/how-to-use-the-wealth-shortlist/ https://welcome-echizenshi.com/how-to-use-the-wealth-shortlist/#respond Tue, 14 Sep 2021 15:26:21 +0000 https://welcome-echizenshi.com/how-to-use-the-wealth-shortlist/ Being a kid in a candy store isn’t always as fun as it sounds. While having a lot of choices can be a good thing, when it comes to investing, it can often be more of a hindrance than a help. Investment funds can be a good choice for long-term growth or potential income. But […]]]>

Being a kid in a candy store isn’t always as fun as it sounds. While having a lot of choices can be a good thing, when it comes to investing, it can often be more of a hindrance than a help.

Investment funds can be a good choice for long-term growth or potential income. But there are thousands of funds available for UK investors, and knowing where to start can be a challenge.

That’s why we launched the Wealth 150 in 2003 – to narrow the field and help investors choose from a shorter list of what our research team thinks are great funds with the potential for long-term returns. Over the years our list has evolved, responding to client needs and changes in the investment industry, as well as our greater collective expertise, to become today the Wealth Shortlist.

In this article, we explore how investors can use the Wealth Shortlist, which includes a variety of funds with different goals and areas of interest.

This article is not personal advice. If you are not sure whether an investment is right for you, seek financial advice.

Funds selected by our analysts

The Wealth Shortlist is designed to help investors build well-balanced and diversified portfolios. Our research team takes a close look at funds to ensure that the list contains only those funds that, according to our in-depth analysis, have the greatest potential for performance.

To use the shortlist to build a portfolio, you need to be comfortable deciding whether a fund matches your investment objectives and risk attitude, and know how to choose and maintain a diverse mix of funds to help. reduce the risk.

The Wealth Shortlist includes funds across a wide range of industries and risk levels that won’t be right for everyone – this is not personal advice. You will need to think about your own goals, attitude to risk, and a larger portfolio before making any investment decisions. Funds can go down as well as up and you might get back less than what you put in.

Learn more about how funds are listed.

How to filter funds

To get investors started on their journey, the Wealth Shortlist can be filtered into three main categories: fund industry, fund objective and fund type.

Fund sectors cover a wide range of geographies and investments, including bonds and corporate stocks (stocks). Generally speaking, we believe that investors should maintain well-diversified portfolios spread across many different investments, sectors, regions and investment styles. But which ones you choose depend on your personal situation.

Equity funds might be a better option for those looking to build wealth over the long term (at least 5-10 years), but are willing to see the value of their investment fluctuate over time. Some are called “equity income” funds – they invest in dividend-paying companies and aim to pay investors income, either monthly or every three or six months. These can also increase in value over time. It is important to remember, however, that income is not guaranteed.

There are several sectors focused on corporate stocks. These include the global sector, where funds can invest in companies around the world. Others focus on a specific country or region like UK, North America, Europe or Japan. Some focus on higher risk areas that offer long-term growth potential but with increased volatility, such as emerging markets, Asia and small businesses.

Other funds focus on bonds. Bonds are loans issued by businesses and typically pay a fixed rate of interest (or income) to the lender. They are often considered “less risky” than investing in a company’s shares. This means that they can help limit some of the ups and downs that normally accompany investing only in stocks. They can still lose money, however, and income from bond funds is variable and unsecured.

Read our latest industry reviews

There are different types of bond funds, including corporate bond funds that focus on high quality bonds. These may offer lower returns than higher risk, higher yield bonds. Strategic bond funds are more flexible. They have the freedom to invest in bond markets, including government, corporate and high yield bonds.

Some funds, including Multi-Asset and Total Return funds, invest in both stocks and bonds, as well as other assets, such as commodities and currencies. Everyone is different with their own goals – some focus more on growth, others on income, while others aim to protect wealth when markets fall. It is therefore worth considering the purpose of each fund and where it invests before considering investing.

To help you, you can also filter funds by purpose – either income, growth, or income and growth.

Finally, you can filter by type of fund – active or passive. Actively managed funds aim to outperform their benchmark over the long term. Tracker funds, or liabilities, aim to perform in the same way as their benchmark index (the market they follow). Some investors prefer one type over the other, although for some a mix of the two may be preferable.

How to use active and passive funds

Look under the hood

Once you know your investment goals and the type of fund you want to invest in, there are several to choose from in each industry.

For each Wealth Shortlist fund, you can choose to display “more information”. Here we present a summary of why our analysts selected the fund and how it fits into a portfolio. For each fund, you can see if it aims to generate income, growth, or both. We also look at other important areas such as management style, major holdings, costs, risks and performance.

You can also consult the technical sheet of each fund. From here you can read more of our research as well as the latest fund research update. These updates provide an overview of the latest opinions from our analysts on each fund, including manager, process, culture and performance.

Keep in mind that in each industry you may want to consider fund managers who use different approaches. This can help you get a more diverse mix of investments within a single industry. Not all investing styles perform well at one time, and managers with different strengths, styles and areas of interest will behave differently over time. Remember that past performance is no guarantee of the future.

Investments are not static, so once you have invested, remember to monitor your portfolio and make changes if necessary. There’s no hard and fast rule about how often you should review your portfolio, but we think twice a year makes sense – at least once a year.

To help you along the way, our analysts provide ongoing research updates for each fund on the Wealth Shortlist, which includes an update on performance and key changes to how the fund is invested. . These are emailed to fund holders, or you can sign up for fundraising here.

Read Fund Updates from the HL Research Team

See all the funds selected by our analysts

The Wealth Shortlist is designed to help investors build their own well-balanced and diversified portfolios. We take a close look at funds to make sure the list only contains funds that our in-depth analysis shows have the greatest potential for performance.

See the wealth shortlist

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A trading crisis? Personal relationships of Fed officials spark controversy and call for change https://welcome-echizenshi.com/a-trading-crisis-personal-relationships-of-fed-officials-spark-controversy-and-call-for-change/ https://welcome-echizenshi.com/a-trading-crisis-personal-relationships-of-fed-officials-spark-controversy-and-call-for-change/#respond Fri, 10 Sep 2021 21:51:00 +0000 https://welcome-echizenshi.com/a-trading-crisis-personal-relationships-of-fed-officials-spark-controversy-and-call-for-change/ September 10 (Reuters) – Media reports this week that two of the Federal Reserve’s 12 regional bank chairmen were active traders. Some of the central bank’s outspoken critics question the rules that allowed them to engage in transactions in the first place. Dallas Fed Chairman Robert Kaplan and Boston Fed Chairman Eric Rosengren made frequent […]]]>

September 10 (Reuters) – Media reports this week that two of the Federal Reserve’s 12 regional bank chairmen were active traders. Some of the central bank’s outspoken critics question the rules that allowed them to engage in transactions in the first place.

Dallas Fed Chairman Robert Kaplan and Boston Fed Chairman Eric Rosengren made frequent or substantial transactions in 2020, the Wall Street Journal and Bloomberg reported earlier this week. The transactions took place in a year in which the central bank took major steps to support the economy and swoon the financial markets after they were hit by the coronavirus pandemic.

While the transactions were permitted under the ethical guidelines of the Fed’s system, their disclosure prompted some observers and a senior lawmaker to point out possible conflicts of interest.

“Forget about individual trades,” said Benjamin Dulchin, director of the Fed Up Campaign at the Center for Popular Democracy, a group that advocates for the Fed to focus more on the needs of American workers. “The problem is that a president of a Fed bank – one of the few people who (…) defined our country’s monetary policy – so clearly has his personal interests aligned with the success of our most large companies.”

On Thursday, Kaplan and Rosengren said in separate statements that their transactions complied with the Fed’s ethical guidelines. They also said they would change their investment practices to address “even the appearance of any conflict of interest” and sell all individual holdings by September 30, shifting the proceeds to cash or index funds. passively invested. Kaplan and Rosengren have both said they will not trade on these accounts while they are Fed chairmen.

The changes came after they both came under fire for trades made last year, which were first reported by The Wall Street Journal here this week. Each has since made public its annual financial statements.

The documents showed that Kaplan, for example, bought and sold at least $ 18 million of individual stocks in 2020, mostly tech stocks like Apple Inc and Amazon.com Inc and energy stocks like Marathon Petroleum Corp. All of these transactions have been reviewed by the Dallas Fed General Counsel, Dallas Fed spokesman James Hoard said.

Rosengren, who has publicly shared his concerns about the potential risks of overvaluation in the commercial real estate industry, held stakes in four real estate investment trusts and carried out other investment transactions, as a Bloomberg report points out. here.

“Unfortunately, the emergence of such authorized personal investment decisions raised some questions, so I made the decision to divest these assets to underscore my commitment to the Fed’s ethical guidelines,” Rosengren said in a statement Thursday. .

CALLS FOR GREATER SURVEILLANCE

Fed officials are subject to specific restrictions, such as not trading during the “blackout period” around each Fed meeting when policy-sensitive information is released, not holding stocks in banks or mutual funds concentrated in the financial sector and do not resell securities within 30 days of purchase.

But the code of conduct also has a broader language.

“An employee must avoid any situation that could give rise to a real conflict of interest or even to the appearance of a conflict of interest,” the code specifies. Those with access to information on market movements “should avoid engaging in any financial transaction the timing of which might appear to be acting on inside information concerning the deliberations and actions of the Federal Reserve.”

Financial information did not appear to differ significantly from previous years. But 2020 was a signing year for the Fed in which, on its own behalf, it crossed the “red lines” to ensure the continued functioning of financial markets. In a swift response to the then unfolding pandemic, Fed policymakers in March 2020 cut interest rates to near zero and rolled out programs designed to keep the Treasury bond markets, securities markets running smoothly. mortgage backed and corporate bonds.

The Fed’s swift action has been hailed for helping avert a further collapse in financial markets, an achievement according to Fed officials that has helped to minimize the blow to the economy. But some have criticized the Fed’s actions for helping to raise asset prices while not doing enough to support small businesses and Main Street households.

Some Fed watchers say it may be time to review the rules.

“This is further proof that the oversight of the chairmen of regional Federal Reserve banks is broken,” said Aaron Klein, senior researcher at the Brookings Institution. “I don’t know if this is a breach of the rules or a breach of the rules.”

US Senator Elizabeth Warren, long one of Washington’s most vocal critics of the central bank’s approach to financial regulation, said Fed officials should not be allowed to negotiate .

“I have said it before and I will say it again: Members of Congress and senior officials should not be allowed to trade or own stock,” Warren wrote on Twitter. here Friday. “Period.” (Reporting by Jonnelle Marte in New York, Howard Schneider in Washington and Ann Saphir in Berkeley, California, editing by Dan Burns and Matthew Lewis)



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Record number of US companies storm the bond market on Tuesday to borrow https://welcome-echizenshi.com/record-number-of-us-companies-storm-the-bond-market-on-tuesday-to-borrow/ https://welcome-echizenshi.com/record-number-of-us-companies-storm-the-bond-market-on-tuesday-to-borrow/#respond Tue, 07 Sep 2021 21:15:00 +0000 https://welcome-echizenshi.com/record-number-of-us-companies-storm-the-bond-market-on-tuesday-to-borrow/ The post-Labor Day borrowing frenzy began on Tuesday with a record 21 U.S. companies with high-grade corporate ratings seeking to borrow a total of around $ 35 billion in the bond market, managers said. portfolio. While other days hold the record for total amount borrowed, Tuesday was poised to see the most U.S. companies issuing […]]]>

The post-Labor Day borrowing frenzy began on Tuesday with a record 21 U.S. companies with high-grade corporate ratings seeking to borrow a total of around $ 35 billion in the bond market, managers said. portfolio.

While other days hold the record for total amount borrowed, Tuesday was poised to see the most U.S. companies issuing quality corporate bonds in a single day, they said.

Caterpillar Financial Corp. CAT,
-1.02%,
Home Depot Inc. HD,
-0.42%,
Southern Company Gas Capital Corp. SO,
-0.12%
and Waste Connections Inc. WCN,
-1.53%
were on the list of issuers vying for funding on Tuesday, the start of what is set to be another blockbuster in September for new debt financing.

Read: Big U.S. corporations to launch loan boom after Labor Day

“Yes, we knew it was coming,” said Matt Brill, head of investment grade credit in North America for Invesco Fixed Income. “But it’s still a lot of offers.”

“You try not to be too early, but you also don’t want to be too late,” Brill said, adding that even with bond managers making room for the typical flood of September bond trading, you need to be “picky enough” about selecting which transmitters to buy, but without missing the window before the show slows down for the year.

“Really, this is your last chance to position your portfolio in Q4 and 2022,” Brill said.

Market conditions looked rather favorable for corporate borrowers on Tuesday, with spreads narrowing by around 15 to 20 basis points from the levels released earlier in the morning, an indication of robust demand, despite some downturn. volatility of Treasury bill rates.

Returns on the benchmark 10-year Treasury index TMUBMUSD10Y,
1.373%
were around 4.8 basis points higher on Tuesday, at around 1.37%, around their highest level in about two months, as the government debt market faced selling pressure during the the first session after the US markets close on Labor Day.

Rate volatility can put the brakes on corporate bond issuance, especially if a large line of borrowers immediately hits a turbulent market, resulting in surprisingly higher borrowing costs for companies. But the hike in benchmark rates on Tuesday was not seen as enough to worsen the borrowing mood.

“It’s a pretty normal first day after Labor Day,” said Tom Murphy of Columbia Threadneedle, head of U.S. Investment Credit, adding that despite a list of concerns weighing on the market, the spreads in the investment grade corporate bond sector has been stuck in a fairly tight trading range.

“I would say things turned out pretty much the way I thought they would,” Murphy told MarketWatch.

The record day for corporate bonds comes amid investor fears that the delta variant of the coronavirus could slow the US economic recovery or affect consumer confidence, factors that weighed on stocks on Tuesday, with the Dow Jones Industrial Average DJIA,
-0.76%
and the S&P 500 SPX index,
-0.34%
ending lower.

Other concerns have been that recently high inflation rates could persist longer than Federal Reserve officials predict, or that the Fed could make policy missteps when considering when and where. by reducing the $ 120 billion in monthly central bank bond purchases or raising rates to almost zero.

That said, US companies weren’t really taking big risks on Tuesday.

“This is not a set of back-to-normal COVID reopening issuers,” Murphy said of today’s borrower list. “It could come.”

But for now, these are mostly “regular” shows, he said, with most businesses deemed more vulnerable to pandemic downturns, such as travel, entertainment, gambling and more. the energy sector, either on hold for now or would. be borrowers in the high yield bond or junk bond category.

Specifically, Home Depot, rated A by S&P Global and A2 by Moody’s, on Tuesday valued a three-part bond transaction of $ 3 billion. Its class of $ 1 billion 10-year bonds maturing in September 2031 was 57 basis points above T-bills, or well below its original range of around 80 basis points as of above the benchmark, according to a person with direct knowledge of the transactions.

Spreads are the level of compensation that investors earn on bonds above a risk-free benchmark to help offset the risk of default. Investment grade corporate bond spreads edged up in recent weeks, but were still close to post 2008 lows hit this summer. Lower spreads may indicate strong investor demand for bonds or a search for yield.

Historically low investment grade US corporate bond spreads

BofA Global analysts are expecting around $ 140 billion to $ 160 billion worth of investment grade US corporate bonds in September, roughly the same as in the past.

But in terms of Tuesday’s trading volume, it’s been almost as busy as entire weeks in September for the past three years, according to Dealogic data.

For example, the week of September 7, 2020, 33 good quality issuers raised around $ 47 billion in the bond market, the busiest week of the month.


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Climate change and monetary policy https://welcome-echizenshi.com/climate-change-and-monetary-policy/ https://welcome-echizenshi.com/climate-change-and-monetary-policy/#respond Tue, 31 Aug 2021 23:35:15 +0000 https://welcome-echizenshi.com/climate-change-and-monetary-policy/ Download PDF Central banks must do their part in the fight against global warming The devastating effects of climate change are becoming increasingly evident. Temperature records are broken again this year in Canada, the United States, Arctic Russia and Central Asia. Globally, the past six years have been the warmest on record, and temperatures in […]]]>

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Central banks must do their part in the fight against global warming

The devastating effects of climate change are becoming increasingly evident. Temperature records are broken again this year in Canada, the United States, Arctic Russia and Central Asia. Globally, the past six years have been the warmest on record, and temperatures in 2020 topped the 1850-1900 average by 1.25 ° C (2.25 ° F).

It is not clear exactly how climate change will affect the economy and the financial system. The European Central Bank (ECB) is currently trying to quantify the consequences of climate change on businesses and banks through an economy-wide stress test. The exercise, the results of which will be published shortly, is based on a series of climate scenarios developed by the Network for Greening the Financial System (NGFS), a global association of central banks and supervisors advocating a more financial system. sustainable. These scenarios make it possible to assess the potential impact of climate change on around 4 million businesses around the world and around 2,000 banks in the euro area.

Preliminary results show that without new mitigation policies, the physical risks associated with climate change – heat waves, windstorms, floods, droughts, etc. – will probably increase considerably (Alogoskoufis et al. 2021). The average probability of default of the credit portfolios of the 10% of euro area banks most vulnerable to climate risks could increase significantly – up to 30% by 2050. Businesses across Europe are exposed to physical risks climate change, although the risks are unevenly distributed (see graph).

Faced with these risks, the costs of transition to a carbon neutral economy appear relatively contained (from Guindos 2021). There are obvious advantages to acting early. The transition can be costly in the short term, but the initial investment will likely be more than compensated for in the long term, as companies avoid the increased physical risk and reap the economic benefits of the mitigation. Based on a range of different models, recent IMF research echoes these findings (IMF 2020). The resulting message is simple: now is the time to take ambitious and broad actions to ensure an orderly transition and mitigate the effects of climate change.

The existential threat posed by climate change means that all policy makers must think about how to contribute to the fight against global warming. While governments are the main players, a consensus is forming that central banks cannot sit on the sidelines. The NGFS, made up of eight members in 2017, now has 95 members and 15 observers, including all the major central banks. In 2019, the IMF joined as an observer.

The main reason central banks should increase their attention to climate change is the likelihood that it affects their ability to fulfill their mandates. The main mandate of the ECB is price stability, a goal shared by most central banks. Evidence suggests that climate change has crucial implications for price stability and also affects other areas of central bank competence, such as financial stability and banking supervision.

Climate change affects price stability through at least three channels.

The main reason central banks should increase their attention to climate change is the likelihood that it affects their ability to fulfill their mandates.

First, the consequences of climate change could hinder the transmission of monetary policy measures from central banks the financing conditions of households and businesses, and therefore consumption and investment. Losses resulting from the materialization of physical risks or stranded assets (such as oil reserves that will not be tapped as the world moves away from fossil fuels) could strain the balance sheets of financial institutions, reducing the flow of credit. towards the real economy. In addition, the more insufficient account is taken of climate change, the greater the risks of policy transmission associated with a sharp and sudden increase in credit risk premiums. Central banks themselves are exposed to potential losses – on securities acquired under asset purchase programs and on collateral provided by counterparties in monetary policy operations.

Second, climate change could further reduce the room for maneuver of conventional monetary policy by lowering the equilibrium real interest rate, which balances savings and investment. For example, higher temperatures could adversely affect labor productivity or increase morbidity and mortality rates. Productive resources could be reallocated to support adaptation measures, while climate-related uncertainty could increase precautionary savings and reduce incentives to invest. Collectively, these factors can reduce the equilibrium real interest rate and therefore increase the likelihood that a central bank’s policy rate will be constrained. But it is far from certain; equilibrium rates could instead rise due to green innovation and investment and chart a way out of the current environment of low inflation and low interest rates.

Third, climate change and policies to mitigate its effects may have a direct impact on the dynamics of inflation. Recent history confirms that a greater incidence of physical risk can lead to short-term fluctuations in output and inflation that amplify longer-term macroeconomic volatility. Unless mitigation policies are more aggressive, the risk of even larger climate shocks increases, with more lingering consequences for prices and wages. In addition, even mitigation policies, such as carbon pricing programs, can affect price stability, potentially precipitating large and lasting trends in relative prices and creating a gap between aggregate and baseline measures. inflation.

As a result of these factors, central banks are beginning to integrate climate-related risks into their monetary policy operations.

Towards carbon neutrality

Climate change considerations were an integral part of the ECB’s Monetary Policy Strategy Review which concluded in July 2021. We published an ambitious action plan and detailed roadmap confirming our strong commitment to further integrate climate change considerations into our monetary policy framework. Our comprehensive review of the strategy has shown that there are many areas in which central banks can help in the fight against global warming, and that more may open up in the future.

By analyzing in depth the potential actions and developing the means to make them operational, for example with regard to the classification of more or less “green” activities, the ECB and other central banks can act as catalysts of a system. more sustainable financial. In addition, by announcing changes to our operational framework in advance, we can encourage market players to accelerate the transition to carbon neutrality.

As part of its action plan, the ECB will integrate climate change considerations into its monitoring of the economy, for example by strengthening analytical capacity in climate-related macroeconomic modeling and forecasting.

As part of its statistical function, the ECB will develop new climate-related statistical indicators, for example concerning the classification of green instruments, the carbon footprint of financial institution portfolios and their exposure to physical climate-related risks.

In addition, the ECB advocates consistent and verifiable climate disclosures at international level. The ECB will introduce disclosure requirements for private sector assets, either as a new eligibility criterion or as a basis for differential treatment for collateral and asset purchase purposes, which could help speed up the process. disclosure in the corporate sector. The ECB will start disclosing climate-related information on its non-monetary policy portfolios and its corporate sector purchasing program (CSPP) by the first quarter of 2023.

From 2022, the ECB will carry out weather stress tests of the Eurosystem’s balance sheet, using the methodology of its ongoing economy-wide weather stress test. The ECB will also conduct a review to assess the extent to which credit ratings and asset valuations under our collateral framework reflect exposures to climate-related risks.

The ECB will also incorporate climate-related criteria in its purchases of corporate bonds. In the past, private sector bond allocations were generally guided by the principle of market neutrality, whereby purchases reflect the composition of the overall market, in order to avoid relative price distortions.

However, emission-intensive sectors tend to have large fixed long-term capital investment needs and generally issue bonds more frequently. As a result, the debt eligible for the CSPP and the ECB’s portfolio have a high issuance intensity. (Papoutsi, Piazzesi and Schneider 2021). In other words, upholding the principle of market neutrality is likely to perpetuate pre-existing market failures or even exacerbate market inefficiencies that result in sub-optimal allocation of resources.

It therefore seems appropriate to replace the principle of market neutrality with a principle of market efficiency that more fully integrates the societal risks and costs linked to climate change (Schnabel 2021), taking into account the alignment of issuers with the EU legislation implementing the Paris Agreement.

With its new strategy and new action plan, the ECB recognizes that climate change is a global challenge that requires an urgent political response, including from central banks. As part of our mandate, we are determined to help accelerate the transition to a carbon neutral economy.

author

ISABEL SCHNABEL is a member of the management board of the European Central Bank.




The references:

Alogoskoufis, S., and others. 2021. “Climate risks to financial stability”. Financial Stability Review, European Central Bank, Frankfurt.

de Guindos, L. 2021. “Shining a Light on Climate Risks: The ECB’s Economy-wide Climate Stress Test. »ECB blog, March 18.

International Monetary Fund (IMF). 2020. “Mitigating Climate Change – Strategies for Growth and Distribution”.
friendly strategies ”, Global economic outlook, Chapter 3, Washington, DC, October.

Papoutsi, M., M. Piazzesi and M. Schneider. 2021. “How unconventional is green monetary policy? Stanford University Working Paper, Stanford, California.

Schnabel, I.. 2021., “From Market Neutrality to Market Efficiency”. Welcome speech to the ECB DG Research Symposium “Climate change, financial markets and green growth”. Frankfurt, June 14.


The opinions expressed in articles and other materials are those of the authors; they do not necessarily represent the views of the IMF and its Executive Board, or the policy of the IMF.


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The historic opportunity for the CLOs within the framework of the SFDR: the Great Leap Forward for the CLOs and the ESG | White & Case LLP https://welcome-echizenshi.com/the-historic-opportunity-for-the-clos-within-the-framework-of-the-sfdr-the-great-leap-forward-for-the-clos-and-the-esg-white-case-llp/ https://welcome-echizenshi.com/the-historic-opportunity-for-the-clos-within-the-framework-of-the-sfdr-the-great-leap-forward-for-the-clos-and-the-esg-white-case-llp/#respond Fri, 27 Aug 2021 23:14:51 +0000 https://welcome-echizenshi.com/the-historic-opportunity-for-the-clos-within-the-framework-of-the-sfdr-the-great-leap-forward-for-the-clos-and-the-esg-white-case-llp/ Secured Loan Bonds (CLOs) may soon be structured as Article 8 funds under the EU’s Sustainable Finance Disclosure Regulation (SFDR) as part of the historic turn of global capital to assets that promote environmental, social and governance (ESG) objectives. To paraphrase a quote attributed to Yogi Berra, while it is difficult to make predictions, especially […]]]>

Secured Loan Bonds (CLOs) may soon be structured as Article 8 funds under the EU’s Sustainable Finance Disclosure Regulation (SFDR) as part of the historic turn of global capital to assets that promote environmental, social and governance (ESG) objectives.

To paraphrase a quote attributed to Yogi Berra, while it is difficult to make predictions, especially about the future, it does not take the prescience of a super forecaster to predict the rapid emergence of CLOs structured as funds. of Article 8 as part of the new disclosure of EU sustainable finance. Regulation. Indeed, we are already seeing Article 8 funds investing in CLOs and it is surely only a matter of time before the CLOs themselves are marketed as Article 8 funds (with the prospect of CLO Article 9 to to follow).

The SFDR aligns with the new EU taxonomy regulation and while the two work together on energy transition and tackling climate change, the SFDR is broader. The SFDR provides a regulatory framework to mobilize private capital for both the energy transition and the broader agenda of the United Nations 2030 Sustainable Development Goals (SDGs). As such, the SFDR can quickly become a global standard to help finance both the energy transition and the egalitarian transition. Within four months of the SFDR’s March 10, 2021 effective date, an astonishing € 3 trillion of funds had been classified as Article 8 or Article 9. This unprecedented growth for a new class of assets has already seen analysts predict that over 50%. of assets under management (AUM) in Europe will be managed through Article 8 and Article 9 funds from 20221.

The convergence of ESGs and CLOs has strengthened since the gradual emergence of negative ESG screening in 2019. This convergence exploded in 2021 to the point of becoming ubiquitous with negative ESG screening provisions in new issues and resets of CLO EUR . 2021 saw other significant changes to ESG provisions in CLOs, with forward-thinking managers introducing subjective ESG rating into CLO portfolios as well as the emergence of objective ESG reporting on CLO assets.

White & Case predicted in 2019 that the SDGs could provide the defining framework for issuers in all markets2 to access the huge demand for ESG assets. This prediction proved to be correct, first in the investment grade market in 3Q19, with Enel printing the first corporate bond linked to sustainable development to commit with reference to the SDGs. Then, in 3Q20, Mexico issued the first sovereign bond to include SDG provisions with its massively oversubscribed SDG 8 offering. Enel and Mexico both posted prices well below initial forecasts due to SDG commitments. 1Q21 saw the first signs of the SDG model in leveraged markets and CLOs with CLOs, including reports on assets covenants with the SDGs. The missing piece of the puzzle to facilitate price prioritization for CLOs has now been addressed by the SFDR which provides the framework for funds to aggregate ESG assets, including those that promote the SDGs.

To explain: while private and sovereign issuers may enter into direct commitments with reference to the SDGs (the EU taxonomy regulation further facilitating this by defining climate mitigation and adaptation), the challenge for funds, including CLOs, increased with a sufficient level of ESG assets for the pricing advantage to emerge (as has been the case in other markets). The SFDR definitively solves this enigma with the promulgation of the Article 8 fund structure.

Participants in the CLO market are all too familiar with the dichotomy under EU law between level 1 rules (such as the securitization regulation and now the SFDR) and the detailed level 2 rules promulgated in the Regulatory Technical Standards (RTS). The level 1 SFDR entered into force on March 10, 2021, but the detailed level 2 rules are not expected to enter into force until July 1, 2022. In the meantime, the European supervisory authorities have recommended in their declaration of 25 February 2021 that national authorities and market players use the draft RTS for guidance (including detailed provisions on asset reporting) pending the finalization of the RTS. This decision paved the way for 3,000 billion euros in assets under management to be included in Article 8 or Article 9 during the first months of the market.

Following the proposals made in the G20 white paper on sustainable securitization,3 which were greeted by G20 leaders at the Buenos Aires summit in 2018, the European Central Bank (ECB) adopted the main proposal of the white paper and started buying sustainable assets (including assets linked to the SDGs) . This ECB program further accelerates the flow of liquidity to the ESG asset market.

It took about 13 years until 2020 to print the first $ 1,000 billion in Durable Bonds and it looks like we will surpass $ 2,000 billion later in 2021. Whereas in 2019 we only had As a small number of leveraged borrowers making ESG commitments, the majority of primary leveraged issues in 2021 contain ESG covenants. This surprising acceleration of ESG in the non-investment grade market, along with SFDR and bond market demand, paves the way for CLOs to commit to minimum ESG portfolio concentrations. The only question that remains is: who will be the first to print an Article 8 CLO?

1 SFDR fund assets explode but the number of funds is “unexpected”
2 The Rise of SDG CLO: How to Use the Bond Market to Achieve the United Nations Sustainable Development Goals by 2030
3 White & Case advises the G20 SFSG on a historic initiative to create a sustainable market for CLOs

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Column by Mervyn King and Dan Katz: Central banks risk independence | Ap https://welcome-echizenshi.com/column-by-mervyn-king-and-dan-katz-central-banks-risk-independence-ap/ https://welcome-echizenshi.com/column-by-mervyn-king-and-dan-katz-central-banks-risk-independence-ap/#respond Tue, 24 Aug 2021 22:30:00 +0000 https://welcome-echizenshi.com/column-by-mervyn-king-and-dan-katz-central-banks-risk-independence-ap/ Amid widespread frustration with the inability of elected policymakers to solve the critical issues of the day, influential voices – including politicians, economic leaders and the general public – have increasingly called on central banks to intervene. Central banks have become “the only game in town. “Central bankers responded readily, moving into the political arena. […]]]>

Amid widespread frustration with the inability of elected policymakers to solve the critical issues of the day, influential voices – including politicians, economic leaders and the general public – have increasingly called on central banks to intervene. Central banks have become “the only game in town. “Central bankers responded readily, moving into the political arena.

This started notably with climate change and the formation of the Network for the Greening of the Financial System. But it didn’t stop there. Central bank officials are now concerned with a wide range of political issues, from racial justice to inequality, from education to public health.

These are serious challenges for our societies. But the seriousness of a problem is not the only, or even the most important, criterion for central bank intervention. Certain social problems deserve a monetary answer. Most don’t.

It is true that many of the new issues that are catching the attention of central banks have economic implications. Clearly, pollution and its effects, including climate change and declining biodiversity, will affect the economy.

But attempts to bring these issues into the realm of monetary policy place too much strain on central banks. In a world of radical uncertainty, their economists find it difficult to meet even their traditional responsibilities of economic forecasting. Recent inflation overruns, after a decade of persistent undervaluations, suggest the need for greater humility.


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