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23 April 2019
Economic Bulletin Issue 3, 2019
Over the course of 2018, euro area non-financial corporate (NFC) spreads widened notably. This box explores the factors underpinning this widening, including deteriorating corporate credit fundamentals, a weaker macroeconomic outlook, spillovers from abroad and a reassessment of global risk appetite. Most importantly, against the backdrop of the end of net asset purchases in December 2018, the box also focuses on the role that monetary policy has played.
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
29 May 2019
Financial Stability Review Issue 1, 2019
The Eurosystem’s asset purchase programme (APP) has contributed to a portfolio rebalancing of securities holdings within the euro area. The ECB’s asset purchases, with their largest component initiated in March 2015, have compressed the yields of securities across a wide range of asset classes. In line with the portfolio rebalancing transmission channel of monetary policy, many investors responded to these lower yields by shifting their holdings towards riskier securities with higher expected returns. Non-banks, in particular, have moved increasingly into less-liquid and lower-rated bonds as well as longer-term securities in a search for yield. To the extent that a slowdown in growth or other market or policy developments lead to an increase in term or risk premia, investors may rebalance back towards safer assets.
23 September 2019
Economic Bulletin Issue 6, 2019
Data on derivatives transactions have recently become available at a number of central banks, including the ECB, and have opened up new avenues for analysis. Collected as a result of reforms of the over-the-counter (OTC) derivatives market, which were primarily designed to counter systemic risk, the data have numerous applications beyond the domain of financial stability. This article presents two such applications. It demonstrates how data gathered under the European Market Infrastructure Regulation (EMIR) can be used to better understand two types of derivatives market that are of particular importance for central bank analysis, namely the interest rate derivatives and inflation-linked swap markets. For the interest rate derivatives market, the article shows how investor expectations for interest rates may be inferred through “positioning indicators” that track how a set of “informed investors” take positions in the market in anticipation of future interest rate movements. Such quantity-based indicators can complement other, more established indicators of interest rate expectations, such as forward rates or survey-based measures. For euro area inflation-linked swap markets, the article exploits the fact that EMIR data allow a first systematic look at trading activity in these markets, which can provide valuable and timely information on investors’ inflation expectations. It highlights a number of structural features of activity in these markets and discusses their possible implications for the monitoring of market-based measures of inflation compensation.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates