US equity futures, Asian and European markets fell on Thursday after the U.S. Federal Reserve’s latest meeting minutes did not guide to more easing or hint at yield curve control while highlighting doubts about the recovery of the world’s largest economy which knocked the S&P500 from its record highs, although sentiment got a modest boost overnight after China announced it had agreed with the US to resume trade talks "in the coming days" to evaluate the progress of their Phase 1 trade deal.
Among early movers, Nvidia Corp slipped 1.1% in premarket trade after results from the data center business of the rising semiconductor industry star disappointed some investors. Intel Corp rose 4% after announcing an accelerated $10-billion share buyback plan. L Brands rose 1.3% after reporting a surprise quarterly profit, boosted by strong demand for Bath & Body Works’ products as well as higher online sales of Victoria’s Secret lingerie.
Markets stumbled after the Fed’s minutes from its July meeting highlighted doubts about the U.S. economic recovery, showing that the swift labor market rebound seen in May and June had likely slowed. "Of course, the Fed agreed that the virus is weighing heavily on the economy: is that some kind of surprise? Apparently it was," Rabobank’s global strategist Michael Every wrote in a note to clients.
Yet despite the overall dovish sentiment, U.S. Treasury yields and the dollar surged with investors focusing on parts of the minutes that showed policymakers downplaying the need for yield caps and targets, nor did they hint at any additional QE.
"There is still a fair amount of uncertainty around the path of the coronavirus, through the flu season, and what that may mean for economic growth,” Jim McDonald, chief investment strategist at Northern Trust, said on Bloomberg TV. “Stocks are somewhat expensive here - we struggle to get to a meaningful positive return on stocks over the next year just because we’ve priced in so much of a recovery already."
As Bloomberg notes, equities in several continents are seeing fresh weakness as investors debate whether momentum that pushed the S&P 500 to a record high this week can be sustained amid lofty valuations and delays in further stimulus to counter the pandemic. While France, Spain and Austria reported the highest daily infections in months, cases have subsided in a few populous U.S. states. Weekly unemployment figures are due in Washington later Thursday.
"The key question for investors is whether the policy responses are enough to mitigate the economic damage,” hedge fund firm Brevan Howard said in an interim report published on Thursday. "Many businesses face solvency risks that are not addressed by borrowing; a debt overhang cannot be cured by more borrowing no matter how cheap it may be,” the fund’s report added.
“Improved financial conditions are narrowly focused on a handful of large companies and benefiting stakeholders who need relatively little economic assistance. The result is that financial assets are expensive by many standard metrics. So long as a V-shaped recovery in risky assets fails to create a V-shaped recovery in economic activity, this tension is a recipe for increased volatility."
The MSCI world equity index was also impacted, sliding 0.6% early on Thursday. The pan-European STOXX 600 was down 0.9% and London’s FTSE 100 fell 0.8%. European equities slumped following a downbeat Asian session. Eurostoxx 50 dropped as much as 1.5%, with the CAC lagging peers. Miners, banking names and financial services are the worst performing sectors; real estate manages small gains
Earlier in the session, MSCI’s index of Asia-Pacific shares outside Japan had its biggest daily decline in five weeks. All markets in the region were down, with South Korea's Kospi Index dropping 3.7% and Taiwan's Taiex Index falling 3.3%. The Topix declined 0.9%, with Carta Holdings Inc and Mitani Sekisan falling the most. The Shanghai Composite Index retreated 1.3%, with Junzheng Energy and Yijiahe Tech posting the biggest slides. Hong Kong stocks fell for a second session as the U.S. suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment with the former British colony.
In FX, the dollar index was choppy overnight after yesterday's sharp spike but appeared to resume rolling over following the news the US and China had agreed to resume trade talks.
Elsewhere, the euro fluctuated ahead of the release of the ECB meeting’s minutes, and the Norwegian Krone slipped after Norges Bank announced it will probably keep interest rates at a record low for "some time ahead." The Turkish lira tumbled after the central bank kept rates on hold. The CBRT also increased required FX reserves ratio for banks that meet growth target by 700bps for all maturities for precious metal repo accounts; all other RRR for FX raised by 200bps.
Treasuries reversed their Wednesady slump and were higher across the curve, led by the long end, amid gains for most developed sovereign bond markets and declines for equities globally. Yields are lower by about 4bp at long end, 10-year by ~3bp at 0.65%, flattening 2s10s and 5s30s curves by ~2bp; S&P 500 futures are lower after cash index Wednesday declined from a record high. 20-year yield is lower by 3bp at 1.165%. The new 20-year bond, which got a cool reception at Wednesday’s auction, is trading at a profit, as are the new 10-year and 30-year issues sold last week. This week’s final auction, a $7b 30-year TIPS reopening, is ahead at 1pm ET.
Germany’s benchmark 10-year Bund yield was at -0.473%, little changed after falling for the past four days in a row. Three-month Euribor fell to a record low, less than four months after rising to a four-year high, helped by the ECB’s policy to provide lenders with cheap loans in response to the economic damage of the pandemic.
In commodities, spot gold rebounded overnight, after declining to a near one-week low on Wednesday, when markets were more bullish. It was up 0.6% at $1,940.4478 per ounce. Oil prices fell, as major producers warned of a risk to demand recovery. OPEC and its allies pressed oil nations that are pumping above output targets to cut more in August to September. Brent crude was down 32 cents, or 0.7%, at $45.05 a barrel while WTI was down 38 cents, or 0.9%, at $42.55 a barrel.
Overnight, U.S. Congressional leaders hinted they were looking for a path toward reviving stalled talks on the next round of pandemic relief - even as both sides remain far from a deal. Any accord is still likely to wait until September despite the fact that the U.S. economy is limping along with many businesses still struggling and millions of Americans out of work.
On the day's calendar, data from the Labor Department, due at 8:30 a.m. ET (1230 GMT), is expected to show the number of Americans seeking jobless benefits dipped to 925,000 in the week ended Aug. 15.
- S&P 500 futures down 0.4% to 3,360.00
- Brent futures down 0.8% to $45.00/bbl
- Gold spot up 0.3% to $1,934.33
- U.S. Dollar Index up 0.3% to 93.16
- Stoxx Europe 600 down 1.4% to 364.59
- MXAP down 1.6% to 169.27
- MXAPJ down 1.8% to 557.36
- Nikkei down 1% to 22,880.62
- Topix down 0.9% to 1,599.20
- Hang Seng Index down 1.5% to 24,791.39
- Shanghai Composite down 1.3% to 3,363.90
- Sensex down 1.2% to 38,160.20
- Australia S&P/ASX 200 down 0.8% to 6,120.02
- Kospi down 3.7% to 2,274.22
- German 10Y yield fell 1.2 bps to -0.484%
- Euro down 0.2% to $1.1818
- Italian 10Y yield fell 1.3 bps to 0.788%
- Spanish 10Y yield rose 1.1 bps to 0.303%
Top Overnight News from Bloomberg
- U.S. central bankers backed off in July from an earlier readiness to set a clearer bar for raising interest rates, a step that would underscore their commitment to an extended period of ultra-loose monetary policy
- Coronavirus infections flared in Europe, with France and Spain reporting their biggest increases in months. South Korea confirmed 288 more cases, while Hong Kong’s outbreak showed signs of easing
- French president Emmanuel Macron ruled out shutting down the country once again even as the virus resurges across several European nations. He said the “collateral damage of confinement is considerable”. Cases in France were up 3,776, the most in three months, while Spain recorded 3,715 new infections. Germany recorded more than 1,000 new infections for the third day in a row.
- Russia’s opposition leader Alexey Navalny is in intensive care in “serious condition” with suspected poisoning. Navalny is Russia’s most prominent opponent to Vladimir Putin.
- As Brexit trade talks approach their deadline, the European Union’s top markets regulator called for rule changes that could limit firms’ ability to manage money in the bloc from London.
- China and the U.S. will hold talks in the near term to discuss the progress of their trade deal, Beijing said, without mentioning a precise date, after last week’s call was postponed.
- Three-month Euribor fell to a record low, less than four months after rising to a four-year high, helped by the ECB’s policy to provide lenders with cheap loans in response to the economic damage of the pandemic.
- The U.S. suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment on shipping with the former British colony, the latest salvo in escalating tensions between Washington and Beijing
- President Donald Trump said he would call on the United Nations Security Council to restore all nuclear- related sanctions on Iran, an attempt to kill off the 2015 nuclear agreement and force Tehran back to the negotiating table
- OPEC+ kept up the pressure on Nigeria and Iraq to stop cheating on their crude-production targets, emphasizing the need for all members to stick closely to their agreement because the market recovery remains fragile
- Kamala Harris, the California senator Joe Biden selected as his running mate, opened the third night of the Democrats’ virtual convention by urging the party to defy what she called a Republican effort to suppress their votes
Asian equity markets traded lower across the board amid headwinds from Wall St where stocks faltered in the aftermath of the less accommodative than expected FOMC Minutes which triggered a pullback in the S&P 500 and the Nasdaq from record highs, while Apple shares also retraced the majority of the early gains that had briefly pushed the tech giant to the unprecedented USD 2tln market cap status. ASX 200 (-0.8%) was pressured by a slate of weak earnings and with underperformance seen in energy names, while Nikkei 225 (-1.0%) retreated below the 23,000 level with Tokyo exporters dragged by a predominantly firmer currency. Hang Seng (-1.5%) and Shanghai Comp. (-1.3%) conformed to the downbeat tone after the US State Department either suspended or terminated three bilateral agreements with Hong Kong and reports also suggested the likelihood of a RRR cut this year has declined with the central bank expected to inject liquidity through reverse repos and MLF operations instead. In addition, the PBoC maintained the 1-year and 5-year Loan Prime Rates at 3.85% and 4.65% as expected, while there were reports US and Chinese trade negotiators plan to confer by video in the coming days regarding the Phase 1 trade deal progress and US actions against Chinese tech firms, although this failed to provide any support for stocks. Finally, 10yr JGBs were initially kept afloat by the risk averse tone but with the upside restricted following the post-FOMC pressure in T-notes and with participants sidelined heading into the 5yr JGB auction which turned out to a be a weaker than previous auction and subsequently weighed on prices.
Top Asian News
- Saudi Support for 2002 Plan Shows It Won’t Copy UAE-Israel Pact
- RBL Bank to Raise $209 Million With Preference Share Sale
- Thailand Arrests Leaders of Protests Challenging the Monarchy
- Philippines Central Bank Pauses After Series of Rate Cuts
European equities trade lower across the board (Eurostoxx 50 -1.3%) as market participants digest the fallout of the FOMC minutes which were judged to be less dovish than some had hoped for. Furthermore, geopolitical tensions have been ratcheted up once again in the wake of comments from US Secretary of State Pompeo who warned that the US will hold China and Russia accountable if they attempt to block sanctions snapback on Iran. Separate reports have noted that US and Chinese trade negotiators plan to confer by video in the coming days over Phase One progress, however, no date has been set yet and expectations for the call, should it take place, will likely be relatively low. In terms of the tone of the market in Europe, all sectors trade in the red, with some of the more defensive sectors such as health care and utilities faring slightly better than peers, but ultimately still lower on the day. Basic resources are a laggard in the region following recent declines in both precious and base metals and post-Antofagasta (-4.8%) earnings with the Co. reporting a 22.4% decline in H1 core earnings amid the COVID-19 crisis; note, the Co. will nonetheless pay an interim dividend. Somewhat of a divergence has been seen in the travel & leisure sector with airlines such as IAG (-4.8%), Ryanair (-3.1%) and easyJet (-2.3%) lower as the UK is set to further expand its list of countries which will force travelers to self-isolate upon return. Conversely, hotel names are faring slightly better with Accor (+0.7%) and InterContinental Hotels (+1.0%) supported by reports in French media suggesting that the former could put in a bid for the latter. Elsewhere, as part of a more anti-cyclical bias, banks and auto names are faring relatively poorly this morning, for banks-specifically, some of the laggards are predominantly Spanish names, which could be a reflection of mounting COVID-19 cases in the nation.
Top European News
- Schaeffler Looks to Raise $1.5 Billion Amid Pandemic Fallout
- Swedish Match Misrepresented Oral Nicotine, Lawmakers Say
- Macron Rules Out Shutdown as Europe Grapples With Virus Upsurge
- Adyen Clinches Wirecard Clients During Online Shopping Boom
In FX, the DXY index oscillates on either side of 93.000 in the aftermath of the FOMC minutes - which pushed back on expectations that further policy action will arrive soon as it indicated that members are not inclined to a forward guidance change and YCC. The release propped up the broader Dollar and index back above the 93.000 mark to a high (yesterday) at 93.059, but thereafter trickled back below the figure as the dust settled in early European hours. The index has since regained traction and printed a fresh intraday peak just under 93.200. with the 21 DMA in proximity at 93.336. US stimulus talks will likely regain focus alongside US-Sino developments, whilst US Philly Fed and the weekly initial and continuing jobless claims, and Fed non-voter Daly are on today’s docket.
- AUD, NZD, CAD, GBP, EUR - All softer against the Buck to various degrees, with the non-US Dollars taking their cue from the subdued risk tone across the market, with the antipodeans bearing the brunt of the pressure. AUD/USD remains sub-0.7200 having had dipped below its 21 DMA (0.7165) in early European trade, whilst the NZD/USD meanders around its 50 DMA (0.6550) after side-lining comments from RBNZ Assistant Governor Hawkesby whose speech largely proved to be a rehash of recent communication. The Loonie also see modest weakness, albeit fares better than its antipodean counterparts, with USD/CAD matching Tuesday’s high around 1.3231 but remaining contained within a tight band ahead of BoC Deputy Governor Beaudry’s panel discussion later today. The core European FX trade in tandem with the Dollar. EUR/USD is edging closer towards 1.1800 to the downside from 1.1868 at best ahead of its 21 DMA at 1.1789 as trades eye the release of the ECB Minutes (Full preview available in the Research Suite). EUR/GBP resides around its 50 DMA (0.9034) having had printed a current parameter of 0.9030-69. Note: EUR/USD sees several large option expiries for today’s NY cut, including EUR 833mln at 1.1800, EUR 2.2bln between 1.1840-50 and 1.4bln at 1.1900.
- NOK, SEK - The Norwegian Crown saw little immediate reaction upon the release of the Norges Bank decision, which kept rates unchanged and reiterated forward guidance as expected with focus turning to the September update for a possible tweak to the repo path. The NOK however is weaker on the day but more so a function of the risk tone across the market, with EUR/NOK closer to the top of its current parameter 10.5380-5940, albeit faring better than its Swedish counterpart which sees more pronounced losses despite the Swedish unemployment rate printing below forecasts. EUR/SEK continues gaining above 10.3000 with a current high of 10.3380.
- CHF, JPY - Both modestly firmer against the USD as the risk averse tone persists during early EU hours, with EUR/CHF straddling around the 1.0800 (vs. 1.0842 at best) mark whilst USD/JPY encounters a barrier at 106.00 to the downside from a high of 106.21.
- EM - EM FX conforms to the overall risk tone with broad-based losses seen across most pairs. USD/TRY gears up for the CBRT’s rate decision where no change is expected to the One-Week Repo rate amid a number of “backdoor” policy tightening measures taken up by the bank to stem the Lira’s freefall, although some have flagged the possibly of hikes to its overnight lending rate alongside its late liquidity window, currently at 9.75% and 11.25% respectively. Meanwhile, the CNH remains resilient to broader USD action after the PBoC left its LPR setting unchanged, whilst Chinese press noted that the likelihood of the PBoC lowering RRR this year has declined, with the central bank expected to inject liquidity through reverse repos and MLF.
- RBNZ Assistant Governor Hawkesby said the balance sheet will continue to expand as it supports the economy while the size and composition of the balance sheet will become a more active instrument for monetary policy decisions. Furthermore, Hawkesby added that it is not necessarily the case that the central bank's balance sheets should revert to their former levels and reiterated the view that a lower or negative OCR, funding for lending programme, foreign asset purchases and interest rate swaps remain possible options. (Newswires)
In commodities, WTI and Brent October futures hold onto modest losses in the aftermath of the FOMC-induced USD strength and the fallout of the JMMC meeting – which in a nutshell reaffirmed the commitments to the OPEC+ deal, made no recommendations for changes to the output target and emphasised the importance of compliance; laggards set to submit their over-compliance plans to the JMMC by August 28th. Note, Argus media citing delegates stated that OPEC+ needs a cumulative 2.3bln BPD of cuts over the next two months to make up for the stragglers’ shortfalls, albeit journalists with access to the ministers’ memo of the meeting say there is no such mention. WTI October meanders around USD 42.75/bbl (vs. high 42.98/bbl) while its Brent counterpart trades on either side of USD 45/bbl (vs. high 45.18/bbl). Elsewhere, spot gold and silver remain impaired by post-FOMC losses sub-USD 1950/oz and below USD 28/oz respectively as a firmer Dollar persists, having had traded within a USD 25/oz intraday range thus far. In terms of base metals, LME copper prices remain subdued by the Dollar and as the red metals track the equity sell-off, whilst Dalian iron ore futures ended the overnight session lower by over 1% against the same backdrop.
US Event Calendar
- 8:30am: Philadelphia Fed Business Outlook, est. 20.8, prior 24.1
- 8:30am: Initial Jobless Claims, est. 920,000, prior 963,000; Continuing Claims, est. 15m, prior 15.5m
- 9:45am: Bloomberg Economic Expectations, prior 38.5; Bloomberg Consumer Comfort, prior 43.7
- 10am: Leading Index, est. 1.1%, prior 2.0%
DB's Craid Nicol concludes the overnight wrap
The repetitiveness of virus, fiscal and geopolitical headlines was finally put to one side yesterday with last night’s FOMC minutes offering an insight into the latest thinking over at the Fed. The minutes showed a Fed that aimed to wrap up its review in the ‘near future’ - most likely at the September meeting - though did not see a massive urgency to provide additional monetary accommodation. Neither were there any clues about imminent changes in either the size of composition of QE. The minutes also showed that officials were unenthusiastic about yield curve control, with our economists continuing to expect the Fed to move towards average inflation targeting. See our US economists’ full recap on the minutes here.
The minutes had enough in them to see equities make a decent U-turn. By the close of play the S&P 500 finished -0.44%, falling -0.71% in the last two hours of the session after the release. The NASDAQ also lost -0.57%, however not before Apple’s market cap had briefly passed the $2tn mark for the first time ever – the first US company to do so. Keep in mind that Apple’s market cap dipped below $1tn on March 23rd. So that works out to over $6.7bn of value added for every business day since, which is staggering. For context it took four decades for Apple to reach a $1tn market cap in 2018.
The dollar has been moving in a hurry in recent weeks too however yesterday did see a large reversal of some of the recent weakness with the dollar index bouncing back +0.67%. Half the move came after the minutes were released and it’s held onto gains overnight too. As for rates, 10y yields ended the session +1.1bps having traded a touch lower going into in the minutes although they have reversed much of that move overnight. The same goes for the bear steepening which was a big talking point last week, with 2s10s up +1.3bps and 5s30s up +2.4bps yesterday but curves flatter this morning.
This morning in Asia markets are following Wall Street’s lead with the Nikkei (-0.88%), Hang Seng (-2.11%), Shanghai Comp (-1.08%), Kospi (-2.93%) and ASX (-0.91%) all in the red. The move for the Kospi hasn’t been helped by the latest virus data in South Korea, with a reported 288 cases in the past 24 hours. Meanwhile, reports that the US has suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment on shipping also isn’t helping broad sentiment this morning, as is the news that President Trump is calling on the UN to renew all nuclear-related sanctions on Iran. Futures on the S&P 500 are also down -0.64% while spot gold and silver prices are up +1.15% and +1.88% respectively.
Back to yesterday, where some of the focus was on earnings in the US retail sector – notably from Target, Lowe’s and TJX. The former’s shares were the best performing in the S&P, jumping +12.65% after reporting both record profit and sales last quarter. Lowe’s share price was up a much more modest +0.30%. Even though the home improvement store beat sales growth expectations, the stock was dragged lower with the overall index over the course of the day. TJX was down -5.33% after announcing that they expect sales this quarter will fall over -20%, as the business model is more geared to in-store purchases rather than online.
In other news, White House Chief of Staff Mark Meadows said yesterday on fiscal discussions that “the outlook for a skinny deal is better than it’s ever been, and we’re still not there”. That followed the comments from Pelosi who suggested there could be a meet in the middle near term solution and a Bloomberg story which suggested that the Trump administration sees a possibility for the two sides to agree on a pared-down $500bn deal that would omit the biggest areas of disappointment for now. The question remains whether the market would see this as enough and whether it would be enough to filter through the economy and into late summer/early fall economic data.
Meanwhile, in emerging markets the Turkish lira rallied after reports yesterday that the country had made an energy discovery in the Black Sea, which was most likely natural gas. We don’t have the full details yet, but the market reaction was notable, with the currency strengthening by +1.17% against the US dollar. Other Turkish assets similarly rallied, with the country’s BIST 100 equity index up +2.95%. Turkey is likely to be in the headlines again today with a monetary policy decision expected later. Our economists are anticipating a hike in the 1w repo rate to an above-consensus 10.0%.
As for the rest of markets yesterday, in Europe the STOXX 600 closed up +0.65% while European banks rallied +2.04%. That was despite bond markets in Europe closing down 1-2bps. In commodities Gold ended -3.67% lower as the dollar rallied, while WTI oil was -0.23%. Finally, in credit markets both HY and IG spreads were little changed in both the US and Europe. On that note, this week we published a report titled “Is duration risk the new credit risk in IG”, specifically looking at the impact of a pick-up in long dated issuance in the US IG market and the subsequent shift that has had in terms of spread duration. See the full note here.
Wrapping things up, in terms of data yesterday, there was a big upward surprise in the UK’s CPI reading, which came in at +1.0% in July (vs. +0.6% expected), whilst core CPI also surprised to the upside at +1.8%. It was the reverse picture in Canada however, where July’s CPI fell to +0.1% (vs. +0.5% expected). Finally, we also had the World Trade Organization’s Goods Trade Barometer, which fell to its lowest since data began back in 2007 at 84.5, below the baseline value of 100 and -18.6 points lower than at the same point a year ago.
To the day ahead now, and there are a number of data highlights from the US, including the weekly initial jobless claims, the leading index for July, as well as August’s Philadelphia Fed business outlook. Over in Europe, we’ll get the latest ECB minutes from their July meeting, as well as the German PPI reading for July. On the central bank front, there’s also a monetary policy decision from the Central Bank of Turkey, as well as remarks from San Francisco Fed President Daly. Finally, the Democratic convention will wrap up tonight, with their presidential candidate Joe Biden due to speak.
Canadian dollar edges higher as retail sales rebound
Canada retail sales climb 2% The Canadian dollar has posted losses on Friday. In the European session, USD/CAD is trading at 1.3446, down 0.28%. Canada’s…
- Canada retail sales climb 2%
The Canadian dollar has posted losses on Friday. In the European session, USD/CAD is trading at 1.3446, down 0.28%.
Canada’s retail sales jump
Canada’s retail sales rebounded in impressive fashion on Friday. Retail sales in July jumped 2% y/y, following a -0.6% reading in June and beating the 0.5% consensus estimate. On a monthly basis, retail sales rose 0.3%, up from 0.1% in June but shy of the consensus estimate of 0.4%. The good news was tempered by the August estimate, which stands at -0.3% m/m and would be the first decline since March. The Canadian dollar showed little reaction to the retail sales release.
The Bank of Canada doesn’t meet again until October 25th and policy makers will have plenty of data to monitor in the meantime. The BoC has been walking a tightrope that will be familiar to most central banks, that of trying to balance the risks of over and under-tightening. The difficulty in finding the right balance was highlighted in the BoC summary of deliberations of the policy meeting earlier this month.
The BoC decided to hold the benchmark rate at 5.0% after concluding that earlier rate hikes were having an effect and slowing economic growth. The summary indicated that policy makers were concerned that a pause might send the wrong message that rate cuts might be on the way. With inflation still above the BOC’s target, the central bank is not looking at rate cuts and stressed at the September meeting that rate hikes were still on the table and that inflation remained too high.
- USD/CAD is testing resistance at 1.3468. The next resistance line is 1.3553
- 1.3408 and 1.3323 are the next support lines
Quantitative Tightening Is Not Biggest Threat To Global Yields
Quantitative Tightening Is Not Biggest Threat To Global Yields
Authored by Simon White, Bloomberg macro strategist,
The Bank of England’s…
Authored by Simon White, Bloomberg macro strategist,
The Bank of England’s quantitative tightening program shows that unwinding central-bank bond portfolios, even with outright sales, need not be disruptive for markets. The greater risk for US and global yields comes from positive stock-bond correlations driving risk premia wider.
The BOE has been a pioneer and a thought leader in QT. While the Fed and ECB have only allowed bonds to run off naturally to help achieve their balance-sheet contraction goals, the BOE has sold gilts outright in addition to allowing bonds to mature.
So far, it has not led to any significant market disruption. This enabled the BOE Thursday to increase the pace of reduction in the Asset Purchase Facility (APF) from £80 billion last year to £100 billion over the coming 12 months from October (while holding Bank Rate steady). As colleague Ven Ram also noted, the schedule of maturing bonds next year allowed the bank to keep gilts sales unchanged from last year while increasing the total amount of the APF’s decrease.
The QT watchwords from the bank are “gradual and predictable.” If gilt sales are conducted in such a way, then market disruption should be minimized. The chart below shows the BOE’s own assessment of the impact of bond sales on the market.
The BOE estimates that of the ~40 bps of term-premium increase since the MPC voted to begin QT in February 2022, about 10-15 bps comes from QT specifically – small in comparison to the overall rise in yields since that time.
QT or bond sales, though, are not the most critical risk facing bond prices in the current cycle. Rising and now positive stock-bond correlations threaten to lead to a structural rise in bond risk premium, and lower prices. The correlation is now positive in the US, Japan, and the UK.
In a positive stock-bond correlation world, bonds lose their portfolio-hedge and recession-hedge capabilities, and thus become less sought after. The penny has not fully dropped yet, but the negative term premium for bonds is increasing, and is prone to rising much higher as they become less desirable.
Yields of developed market countries are biased structurally higher, but QT is unlikely to be the culprit. Instead, it allows central banks to reload their capacity for a future time when they may need to restart quantitative easing, in order to stabilize the market from sharply rising term premia.
Nine women share what it’s like to have a miscarriage
Ten years of studying miscarriage has taught me that no two women will have the same experience.
Miscarriage is a common woman’s health experience, but one that affects people differently. Ten years of studying miscarriage has taught me that no two women will have the same experience, and that the same woman is likely to experience separate miscarriages very differently.
There’s also a great deal of variation in types of miscarriage and a lack of understanding of this, which often leaves women adrift.
A miscarriage is the loss of a pregnancy during the first 23 weeks. It’s estimated that one in five pregnancies end in miscarriage, with most occurring in the first 12 weeks. My research focuses on these early miscarriages.
Approximately 1 in 100 women in the UK experience recurrent miscarriage, which is defined as having three or more miscarriages consecutively. And black women in the UK are 43% more likely than white women to experience a miscarriage.
This article is part of Women’s Health Matters, a series about the health and wellbeing of women and girls around the world. From menopause to miscarriage, pleasure to pain the articles in this series will delve into the full spectrum of women’s health issues to provide valuable information, insights and resources for women of all ages.
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Vaginal bleeding which may be followed by pain in the lower abdomen and cramping are the main signs of a miscarriage. However, 1-5% of pregnancies end in a missed miscarriage: when no pain or bleeding occurs despite the pregnancy not progressing.
This is typically diagnosed by an ultrasound. For a number of the women I interviewed, this happened at their routine 12-week scan. It can be a shocking, unexpected and distressing experience – as Shirley explained:
I went for my scan at the [hospital] and we saw a very small foetus. I was chatting away and then the sonographer said, “I have bad news” – and they told us the baby had passed away at ten and a half weeks.
Nicole described being “gobsmacked” when she was told at her 12-week scan that “there was a sac but nothing else”. She continued:
To me, a miscarriage is when you bleed and have cramps, but I had none of that. I had no idea what a missed miscarriage was … I had no idea the pregnancy had ended.
The 12-week rule
Many of the women I interviewed spoke about the unwritten “12-week rule” of not disclosing a pregnancy until after this point, in case of complications or loss. But following a miscarriage, many women described this wait as being an unhelpful tradition which left them feeling isolated, as family and friends didn’t know what they were going through.
For Nicole and Shirley, there was certainty about the pregnancy ending, but this isn’t always the case. For some women, a diagnosis of miscarriage may be more drawn out.
Grace went to an Early Pregnancy Assessment Unit when she experienced pain during early pregnancy. She had not experienced any bleeding, but had a feeling that things “weren’t quite right”. An ultrasound was unable to locate the pregnancy. She was told her dates might be out and it might be too early to identify the pregnancy, or that it might be a miscarriage. She explained what happened next:
I had a [hormone] test and the levels [indicated] that I was lower in weeks than my actual dates … I had to go back two days [later] and have another test done.
The second blood test revealed that her pregnancy was not continuing, and Grace later miscarried.
Miscarriages are often understood to involve cramping and bleeding followed by the spontaneous expulsion of the foetus or pregnancy tissue. But this scenario rarely, if ever, happened to the women I interviewed. Indeed, miscarriages are often drawn out over days, weeks or even months.
When Miranda first contacted me, she said:
My missed miscarriage was identified quite early, at approximately seven to eight weeks … [but] the process has taken nearly three months.
When I first interviewed Miranda, she was still undergoing her miscarriage and did so for six months in total. While her experience is unusual, it illustrates how varied miscarriages can be.
Women are often told a miscarriage “will be like a heavy period”, yet most of the women I interviewed said that this is woefully inaccurate. Grace said:
This whole idea of a heavy period was not my experience. I was having contractions [and] passing a lot of blood.
‘I blame myself’
Many of the women I spoke with felt responsible for their miscarriage, as Liv described:
I still blame myself … I’ve had doctors, nurses, family, friends and everyone tell me not to blame myself, but I think I [always] will.
Anxieties about fertility and future reproduction were common, as was apprehension during subsequent pregnancies. Marianne told me:
I felt really anxious, especially between finding out I was pregnant at ten weeks and feeling the baby kick for the first time.
Many women also described feelings of failure, as Vicky and Emma did:
I had this real sense that there was something wrong with me.
I’m faulty and I can’t do what women are supposed to be able to do … You just feel fundamentally broken as a woman.
However, some women, such as Ruth, also expressed relief following a miscarriage:
I would have had a medical termination. I’m really glad I didn’t have to … I feel very relieved that it has happened this way.
Views of miscarriage
In the Early Pregnancy Assessment Unit where I was based, after a miscarriage women are offered access to specialist counsellors – a service many made use of and found helpful in navigating their feelings of loss and grief.
The recognition of the way miscarriage affects those who experience it is very welcome because in the past, miscarriage was seen as an unfortunate if routine event – but one that women would and should recover from quickly.
However, over the past 30 years, miscarriage has progressively been framed as the loss of a baby for which the appropriate response is one of bereavement. While many women I interviewed did, indeed, experience grief and distress in the face of their loss, not all did.
This is important because over the 10 years I’ve been researching miscarriage, I’ve become concerned that this latter group of women are not served by current clinical and public approaches to pregnancy loss. At times, this results in women feeling as though there is something wrong in the way they are experiencing their miscarriage.
This is why it’s important to recognise that, just as the physical experience of miscarriage varies, so too do the emotional and psychological experiences.
Susie Kilshaw receives funding from The Wellcome Trust. Wellcome Trust University Award in the Humanities and Social Science Grant number: 212731/Z/18/Z (2019-2025).uk
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