Category: Economics

Trying Not to Get Ahead of Ourselves


Surveys show that around 90% of primary dealers and economists expect the Fed to raise interest rates in the middle of December. Over the past month, the two-year US note yield has risen by nearly 37 bp to 91 bp. 

The implied yield of the December Fed funds futures contract has risen by 4.5 bp to 21.5 bp at the close before the weekend. It is the highest yielding close in more than a month.  It fully discounts a 25 bp rate hike, IF one assumes that the effective Fed funds rate will average 30 bp (instead of the midpoint of the new range). 

China’s Tie-up with Africa Needs Fundamental Acceptance by Africans


China’s ties to Africa are likely to get stronger this year, as the world’s biggest economy appears poised to once again, double its investments across the fast-growing continent.

The run-up to the sixth Forum on China-Africa Cooperation (FOCAC) early next month in South Africa is under way. The forum – in its 15th year and the first held under President Xi Jinping’s administration – has been the main venue for setting the investment, trade and integration agenda between China and countries in Africa.

Is the U.S. Complicating TPP Ratification?


Alongside this week’s APEC leaders’ summit in Manila, US President Obama met counterparts and trade ministers from 11 other Asia-Pacific states that agreed in October to the expanded Trans-Pacific Partnership (TPP).

These states, covering around 40% of world GDP, cannot sign the free trade deal before February 3, when the US Congress finishes its 90-day review. However, Obama and others in Manila reiterated the importance of the TPP for regional and global economic integration.

New Leaders, New Summit, New Goals


On 1 November 2015, the leaders of East Asia’s three main powers gathered together to hold the sixth Republic of Korea–China–Japan (KCJ) Trilateral Summit in Seoul, the Republic of Korea (ROK).

Regional Fed Presidents Could Make a Blue Monday


The Federal Reserve holds a discount rate meeting on Monday.  There is some speculation that the 75 bp discount rate could rise.  At the September meeting, which is not the same at the FOMC meeting five of the 12 regional Federal Reserve banks voted into favor a raising the discount rate.  One favored cutting it. 

The economic data has generally strengthened since then.  The FOMC statement last month and the subsequent official comments have indicated that most officials appear on board with a December rate hike, barring a shock. 

World Bank Sanitation Report Honors World Toilet Day


The Pacific region has seen enormous growth in urban populations as more and more people migrate from rural areas to capital cities. As a result, water, sanitation, and health care have become challenges in many parts of the region. According to a report by the World Bank, these urban hubs are now in urgent need of improvement.

The ECB’s Need for a Meaningful Rate Cut


The US dollar is rebounding today after yesterday’s correction.  Those losses seemed to have been a function of some profit taking after the seeming confirmation in the FOMC minutes that the Fed was set, barring a significant surprise, to raise rates next month.  The dollar bulls were already beginning to buy the dip before Draghi spoke. 

Down on the Japanese Farm with the TPP


The issue of liberalising Japan’s agricultural market presented a major, if not the major hurdle to the Abe administration’s agreement with the Trans-Pacific Partnership (TPP) deal struck in Atlanta on 5 October 2015. Japan has agreed to abolish tariffs on 81 percent of 2328 agricultural, forestry and fisheries imports — more than on any other free trade agreement concluded by Japan so far but lower than any other participating country.

Dovishness or ‘Buy the Rumor, Sell the Fact’?


The US dollar is trading heavily today.  The losses are not particularly steep against either the majors or the emerging market currencies.  A common narrative is attributing the dollar’s pullback to “dovish minutes,” but this is not a fair assessment, we think.  Instead, it seems that a typical buy the rumor sell the fact offers a more robust explanation.  The FOMC minutes did not contain any surprises, and it does not appear anyone’s views really changed.  The December Fed funds futures finished yesterday unchanged for the ninth consecutive sessi

The AIIB and a New Asian Financial Order Living Parallel Lives


Chinese financial diplomacy has reached its coming of age. This new era started when China first announced the introduction of the Asian Infrastructure Investment Bank (AIIB) in 2013. The bank should be operational by late 2015. Combined with other Chinese-led initiatives, an Asian financial order led and shaped by China is slowly emerging in the Asia Pacific. The geopolitical and geoeconomical implications of such a transformation of this magnitude should not be underestimated, both at the regional and global levels.