Executive Summary
- Fasten your bond belts. Global yields moved close to pre-financial-crisis highs in September on the expectation of higher-for-longer central bank policy rates. The ascent of real yields has reignited debt-sustainability concerns in both Europe and the US. Also, speedy interest-rate increases are testing the financial system once again.
- Italian spreads testing the ECB again? Italian yields also jumped, driving spreads to 200bps and thus questioning the Italian (and European) triple shield against a repeat of 2012: (i) the ECB’s TPI, (ii) the fiscal credibility of the 2024 budget and (iii) the retail strategy to diversify the investor base (in that order).
- CBAM’s Happy (?) Birthday. Designed to provide a level playing field for EU producers amid rising carbon prices, the Carbon Border Adjustment Mechanism (CBAM) requires overseas firms that previously benefited from laxer environmental standards to shoulder a similar carbon cost as their EU counterparts. Troubles remain.
- India is open for (bond) business. The inclusion of India in J.P. Morgan’s main EM local currency sovereign bond indexes is expected to bring significant passive and active inflows, lower corporate borrowing costs, and to signals India’s renewed commitment to openness to foreign investors.
- Celebrating Claudia Goldin’s Nobel with a call to action! In honor of this year’s Nobel laureate in economics Claudia Goldin, we calculated that women in Australia, France, Germany, Italy, Spain, UK, and the US continue to give away EUR950bn of excess unpaid labor every year. Remember: Increasing remote work should not distract from reforming public provision and quality of childcare services, as well as tax regimes for second earners, are essential to increase the number of women in the workforce.