Interest Rates

Mario Draghi’s tacit advice to Christine Lagarde

24 Oct 2019

The outgoing ECB boss says his successor needs no guidance. But his last big news conference contained clues. First, never give up, though economic risks are rife. Second, turn the page on infighting. Third, be wary of financial bubbles. Fourth, expect brickbats, whatever you do.

Trailblazing German bond sale has hidden message

21 Aug 2019

The government of Europe’s biggest economy managed to sell 30-year debt at a negative yield for the first time. Expectations of imminent monetary easing created some demand. However, details of the auction reveal a shortage of investors buying into the fixed-income mania.

Gold would shine brighter in thick of currency war

21 Aug 2019

Trade and geopolitical tensions have heightened demand for safe havens, but with policymakers trying to keep currencies down, the dollar, yen and Swiss franc offer only partial protection. The yellow metal is different. No one will push back if its price keeps rising.

German weakness gives ECB carte blanche to be bold

14 Aug 2019

Europe’s biggest economy shrank in the second quarter as global trade tensions hurt export-orientated manufacturers. The problems will filter through to other sectors. That will lessen any Teutonic resistance to European Central Bank boss Mario Draghi’s planned monetary easing.

Brexit makes Carney less of a central bank oddity

1 Aug 2019

Bank of England boss Mark Carney is, like everyone, in the dark about whether Britain will crash out of the EU. Without that uncertainty, he might be tightening policy when peers are either easing or hinting they might. Being odd man out would be better than the current limbo.

Markets want to see colour of Mario Draghi’s money

25 Jul 2019

The European Central Bank chief opened the door to even looser monetary policy. The dearth of decisions or details meant the euro reversed initial losses while bond and stock prices gave up brief gains. He will have to deliver on his big promises before investors give him credit.

Swiss currency ticks towards new showdown

22 Jul 2019

The franc hit a two-year high against the euro. Policy interest rates are already negative so cutting them further may fail to dent its strength. A return to major intervention risks U.S. ire. Traders will take advantage of central bank boss Thomas Jordan’s bind.

New breed of central bankers is harder to read

11 Jul 2019

Jerome Powell at the Fed and Christine Lagarde, nominated to be the next ECB chief, are lawyers by training. Their thinking is more fluid than predecessors whose economic tenets informed a world view. That has benefits, but also means it’s harder to predict how they will react.

Global central bank assault claims Turkish victim

7 Jul 2019

Desperate to boost growth, President Tayyip Erdogan has fired the country’s central bank chief. He’s the latest casualty of a worldwide attack on independent monetary authorities. The blow to confidence makes any cut in the main rate, held at 24% since September, more damaging.

Buybacks prolong Wall Street rally nobody loves

20 Jun 2019

U.S. stocks are near record highs – thanks in part to purchases by their issuers. Investors are pulling out of equities and fund managers report extreme bearishness amidst a weakening global economy. Hopes of Fed rate cuts are a fragile support when it’s the only game in town.

Mario Draghi puts easing back in play on way out

6 Jun 2019

The ECB boss is set to end his eight-year term without once raising interest rates. Some colleagues have even floated the possibility of further cuts or more asset buying. His successor will have to figure out how to boost inflation and growth without banks scaling back lending.

How to pick the next Bank of England chief

24 Apr 2019

The hunt is on for a replacement for Governor Mark Carney, who leaves in early 2020. Only talented economists with top-notch central bank experience need apply. Creativity and grit are also required. Breakingviews’ interactive yardstick helps sift through the runners and riders.

ECB sop to banks will only help at the margin

10 Apr 2019

President Mario Draghi is considering ways to ease the pain that negative policy rates inflict on banks, such as tiered deposits in Japan and Sweden. Savings-rich German lenders would benefit most. But any earnings boost would be modest and does nothing to remedy high costs.

“Japanisation” of ECB will blight Europe’s banks

25 Mar 2019

Weak economic activity is raising the chances of the European Central Bank copying its Japanese counterpart, which has kept rates ultra-low for two decades and adopted ever more radical measures to boost inflation. Lenders in Japan show European peers the heavy toll that takes.

As earnings go, so goes the world economy

20 Feb 2019

For the first time since 2013, no country in the MSCI World Index is seeing more earnings upgrades than downgrades, Morgan Stanley says. The phenomenon usually coincides with U.S. or euro zone recessions. That augurs poorly for an incoming raft of economic data.

Trump’s Fed pressure is a paper tiger, so far

14 Jan 2019

The U.S. president often bashes the central bank’s rate increases on Twitter. It’s unhelpful but transparent – which makes it easier for the Fed to resist. The real danger is if Trump bullies Jerome Powell behind closed doors, or changes his tactics for the two open board seats.

Strong U.S. jobs are weak tonic for markets

4 Jan 2019

Payrolls expanded at a surprisingly robust pace in December and wages ticked higher. The data shows an American economy ending the year on a high note. But employment is a lagging indicator. Slowing earnings and trade-war risks are likely to be more powerful market motivators.

Buyout lenders will enter a new world of pain

4 Jan 2019

Rising bond yields and volatile markets mean the leveraged finance boom is over. The lenders which financed it have taken more risk than ever, and given away the ability to control struggling companies. When deals do go bad, they will get back much less than they are used to.

U.S. bond yields turn from green light to red

4 Dec 2018

Treasury yields plunged to a three-month low on Tuesday and flashed a potential recession signal. While easy rates have supported the economy and stock market during the recovery, the latest moves suggest troubling weakness. They also raise the risk of a Fed policy mistake.

Powell and Carney at least know their own limits

29 Nov 2018

The Fed chair irks U.S. President Donald Trump when rates rise, while the Bank of England boss took all-around flak for unveiling worst-case Brexit scenarios. Central bankers are imperfect but, unlike some critics, they rarely claim infallibility and usually show their workings.