Conditioning and the Bank of England’s credibility problem

30 June 2023EconomicsBank of England, central banking, Federal Reserve, inflation, interest rate swapsNick Dunbar

The Bank of England uses forward rates derived from the swap market to forecast future base rates. This approach is flawed, and has contributed to the Bank’s loss of credibility in the fight against inflation.

Inflation and the return of corporate borrowing

8 June 2023Credithealthcare, inflation, utilitiesNick Dunbar

High interest rates were a dampener on corporate borrowing but now the trend has reversed, led by two sectors with their own inflationary characteristics

When linkers bite back

21 October 2022Economics, Risk Commentaryforecasting, inflation, inflation-linked bonds, national accountsNick Dunbar

Inflation-linked bonds are proving costly to governments that issued them, and in the case of the UK, markets imply the pain will last for years to come.

Descending the debt mountain

17 June 2022Creditcorporate bonds, inflationNick Dunbar

Inflation-busting is likely to involve a recession, and companies are starting to reduce debt built up during the pandemic. What’s the best way to do it?

Cash positioning for an upwards rate shock

3 May 2022Funds, Risk Commentarycash, Federal Reserve, inflation, money market funds, repo lendingNick Dunbar

While the Federal Reserve anticipates 2-3% interest rates will be enough to combat inflation, the choice of cash holdings for financial institutions provides a clue to their confidence in the Fed’s strategy. The evidence shows that they expect a bumpy ride.

Inflation and the corporate debt hangover

25 March 2022Creditcorporate bonds, inflationNick Dunbar

Inflation is supposed to be good for corporate bond issuers, because the real value of repayments is eroded. But what if a company’s ability to repay debt from earnings is eroded even faster?

Taperchase

9 December 2021Articles, Economicsinflation, quantitative easingNick Dunbar

What happens when inflation and quantitative easing collide? Despite the taper talk, QE isn’t going away soon.