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M&G Pride
Sunday 16 June 2024

The Journey to QN The Journey to QN

We have written many times on QE (Quantitative Easing) and QT (Quantitative Tightening); however, we have never talked about QN. QN is the ultimate goal for central banks – but what exactly is it? The ‘N’ in QN stands for Neutral. In a steady state of economic growth, money must be printed to facilitate inflation in the economy. In this steady state, there is a simple requirement to have enough money tokens in the system to achieve the desired growth in the nominal GDP of the country, which is defined as the combination of real growth and inflation.

The BV comic

Blast from the Past Blast from the Past

17 years of comment

Discover historical blogs from our extensive archive with our Blast from the past feature. View the most popular blogs posted this month - 5, 10 or 15 years ago!

Blast from the Past Blast from the Past

17 years of comment

Discover historical blogs from our extensive archive with our Blast from the past feature. View the most popular blogs posted this month - 5, 10 or 15 years ago!

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Zero Inflation in May, Bond Rally Underway
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But French assets are really struggling, and credit is starting to weaken.

June 2024

Z Spread, Select Italian banks

BFF – The hidden risks of light(er) touch regulation

Last month, BFF, a small Italian bank with €12 billion in total assets revealed that its regulator, the Bank of Italy, has requested it to “temporarily suspend profit distributions”, causing its stock to plunge by over 30%. Fortunately for bond investors, the limitation does not apply to interest payments on BFF’s AT1 instruments.

May 2024

Cracks in the armour of the resilient consumer

Consumption spending accounts for approximately two-thirds of the US economy. It is vital that we understand the dynamics of the consumer because if the consumer falters, so does the US economy, which has far-reaching consequences. The surprising resilience of the US consumer in the face of a pandemic and then rising interest rates has surprised many.

Is the US economy really that different?

With the exception of the US, the rate-cutting cycle is still alive and well. Switzerland and Sweden have recently kicked off the easing cycle with their first rate cuts. Last week, the Bank of England sounded more dovish than expected, suggesting they are also close to cutting rates, and that rate cuts might be sharper than expected. The European Central Bank is also signalling rate cuts this year.

Inflation is still moving in the right direction… slowly but surely!

The disinflationary process appears to be back on track. After some higher-than-expected reports, US inflation has finally come in slightly lower than expected. Headline inflation has decreased to 3.4% YoY compared to the previous reading of 3.5%, while core inflation stands at 3.6%, the lowest level in the past three years.

Oil – A Global Tax

Few commodities wield as much influence in the intricate web of global economics as oil. Oil is pivotal in driving economic growth and development as the primary energy source for transportation, manufacturing, and countless other sectors.

April 2024

We need to talk about the 61s

With interest rates having moved meaningfully higher over the last two years, fixed income investing has moved front and centre for investors. A favourite bond has been the low coupon 2061 maturity (UKT 0.5 2061). Why is this?

Gold prices: beyond inflation and real yields

Renowned for its role as a hedge against economic uncertainty and inflation, gold has long captivated investors. One key factor influencing gold’s price is the relationship between real yields and inflation. Over the long term, gold has protected one against the pernicious effects of inflation and remains a powerful diversifier within an investment portfolio.

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