US interest rates rise evokes ‘uneasy calm’
Print Edition
AN “uneasy calm” prevails in financial markets about the first increase in US interest rates in almost a decade, which is widely expected later this month, the Bank for International Settlements said in its latest report.
The restrained reaction, especially from emerging markets, to the Federal Reserve’s signals has been encouraging, the quarterly update from the Switzerland-based forum for major central banks said, but it saw volatility to return.
“Calm has reigned over financial markets, but it has been an uneasy calm,” said Claudio Borio, the head of the BIS Monetary and Economic Department.
With interest rates in many parts of the world testing “the boundaries of the unthinkable day after day”, Borio said it wasn’t surprising how sensitive markets remained to the actions of major central banks.
“There is a clear tension between the markets’ behavior and underlying economic conditions,” Borio said. “At some point, it will have to be resolved. Markets can remain calm for much longer than we think.”
Equity trading at a discount to book value by banks in many countries remained a “clear sign of mistrust”, he said, and the level of bad loans at eurozone banks needed addressing “vigorously.”
The report also analyzed investment, lending flows and debt issuance trends.
Between June and September, when global markets were rocked by worries about China’s economy, slumping commodity prices and a surging dollar, debt issuance in emerging markets shed the most since the end of the financial crisis in 2009.
Across all markets, debt issuance sank almost 80 percent compared with both the second quarter of this year and the third quarter of 2014.
Net issuance by Brazilian and Turkish banks and other financial firms was negative at minus US$2 billion and minus US$1.6 billion respectively. For Chinese financial firms, it plunged to US$300 million from US$10 billion the previous quarter.
“The financial vulnerabilities in emerging market economies have not gone away,” Borio said. “The stock of dollar-denominated debt, which has roughly doubled since early 2009 to over US$3 trillion, is still there.
“In fact, its value in domestic currency terms has grown in line with the US dollar’s appreciation.”
The report said emerging markets issued 62 percent of all their bonds in euros between June and September, more than trebling the 18 percent share from March to June, to tap the record-low interest rates the European Central Bank’s stimulus program is creating.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
