How Fed asset purchases reduce yield term premia

An updated Federal Reserve paper suggests that there has long been a link between the net supply of government securities and term premia on...

Policy rates and equity volatility

Measures of monetary policy rate uncertainty significantly improve forecasting models for equity volatility and variance risk premia. Theoretically, there is a strong link between...

The consequences of increased financial collateralization

There has been a strong upward trend in collateralization since the great financial crisis. Suitable collateral, such as government bonds, is essential for financial...

The demographic compression of interest rates

Declining population growth and rising dependency ratios in the developed world have been one key factor behind the decline in nominal and real interest...

BIS re-interpretation of TARGET2 (im-)balances

In an easily readable working paper Stephen Cecchetti and colleagues explain the connection between euro area break-up concerns, Target2 balances, and financial conditions. This...

The limitations of ECB bond purchases

The European Central Bank's public sector bond purchases are sizeable and their pace may increase further. However, issue and issuer limits constrain their time horizon. For...

The four components of long-term bond yields

A BOJ paper proposes an affine terms structure model for bond yields under consideration of the zero lower bound. It estimates the contribution of...

Bank of Japan policy and long-term bond yields

A speech by Bank of Japan’s Takehiro Sato underscores that stabilizing long-term JGB yields has become a particular focus in the context of “Qualitative...

Historical precursor of Abenomics

Warwick professor Nicolas Crafts notes that the UK’s exit from recession and deflation in 1930s has similarities to Japan’s current expansionary policy. At the...

How to hike U.S. federal funds rates in a glut of...

Asset purchase programs have left the U.S. banking system with USD2.9 trn in (mostly excess) reserves. Raising the target federal funds rate in this...

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Risk-parity positioning in equity and (fixed income) duration has been a popular and successful investment strategy in past decades. However, part of that success...

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