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Weekly Investment Update – A Green Swan?

As economies continue to reopen, stronger economic data bears witness to the strength of the cyclical recovery. Signs of rising inflation globally have not roiled bond markets excessively…

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As economies continue to reopen, stronger economic data bears witness to the strength of the cyclical recovery. Signs of rising inflation globally have not roiled bond markets excessively. The message from central banks on rising inflation being transitory in nature is, so far, holding the line.

Covid-19 – new case numbers fall

Globally, the number of new Covid cases has continued to fall. Global new case numbers have now dropped to below 500 000 per day, while new cases in India have fallen further to less than 150 000 per day.

Transmission in Latin America is a concern as infection rates remain high. Advanced economies continue to experience broad-based declines in infection rates as vaccine coverage expands.

Evidence points to only a mild reduction in the efficacy of vaccines against the Indian variant in the UK, calming fears of new variants pushing the economic reopening off course, for now.

US bond markets on hold

The minutes of the April meeting of the US Federal Open Market Committee published earlier this month revealed a larger than expected constituency of monetary policymakers favouring moving forward with the process of tapering central bank quantitative easing (QE) ‘sooner rather than later’.

In response, US nominal bond yields rose to their highest since the start of April. Since then, they have fallen, ending May at around 1.59%.

The minutes highlighted that ‘a number of participants’ felt that if the US economy continued to recover “it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of [QE] asset purchases.” The more hawkish participants highlighted that “supply chain bottlenecks and input shortages may not be resolved quickly and, if so, these factors could put upward pressure on prices beyond this year.”

Since then, speeches by several Fed governors have been on the dovish side, pointing to the inflationary effects of the recovery as being temporary despite further upside surprises on producer prices and the personal consumption expenditure (PCE) price index (up 3.1% year-on-year excluding food and energy after 1.9% in March).

Surveys in the US of business sentiment have continued to reflect expectations of an acceleration in the pace of activity in June, but markets are now focusing more on when a deceleration will occur.

Nonetheless, markets continue to price a more aggressive rise in central bank policy rates than the guidance provided by the Fed in its ‘dot plot’ has indicated. For the time being, markets are marking a pause ahead of the June 4 employment report and the Fed’s policy meeting on 16 June.

European catch-up underway

Earlier in May, eurozone composite purchasing managers’ indices PMIs exceeded the consensus forecast, suggesting the recovery is well underway during the second quarter and boding well for a rebound in survey indicators in the months ahead.

There should be further room to run as vaccination campaigns are allowing economies to carry on reopening. As a result, something of a European catch-up is very much on track. It cannot be excluded that the improving outlook will allow the European Central Bank (ECB) to take the foot off the monetary gas pedal in June.

However, price pressures have continued to mount at a heady pace in the eurozone, driven by growing supply-demand imbalances. Data published on 28 May showed the eurozone’s harmonised index of consumer prices (HICP) rose by 2% in May, up from 1.6% in April. Supply chain disruptions, including difficulties in re-hiring, are persistent throughout the eurozone, reflecting the imbalances.

The ECB’s governing council meets next week to decide whether to adjust monetary policy — including its recently accelerated pace of bond buying — in response to signs that economic activity and prices are rising as Covid-19 lockdown measures are eased.

Several policymakers, including President Christine Lagarde, have insisted, however, that the recent surge in inflation is only a temporary phenomenon, driven by one-off effects. They predict it will fade next year. A 13.1% year-on-year rise in eurozone energy prices was the main factor driving up the HICP to its highest since October 2018. Core inflation, excluding the more volatile prices of energy, food, alcohol and tobacco, rose more modestly than the headline figure, from 0.7 % in April to 0.9% in May (see exhibit 1).

Green bonds and a green swan

Green bond issuance is growing rapidly in 2021. With nearly USD 200 billion issued thus far, it is quite possible that total issuance this year will reach between USD 430 billion and USD 460 billion, given that several of the typically larger issuance months are yet to come.

Sustainability-linked bonds (SLB) have also doubled in issuance this year, with growth forecast to rise in 2021 to between USD 80 billion and USD 110 billion.

Today sees the start of ‘Green Swan 2021 – Coordinating finance on climate’ – an unprecedented conference for central bankers. The virtual meeting is co-sponsored by the Bank for International Settlements, the Bank of France, the International Monetary Fund and the Network for Greening the Financial System (NGFS). The topic: “How in practice can the financial sector take immediate action against climate change-related risks?”

The clear message from the NGFS is that climate-related risks are part of financial risks. As such, they are not optional extras for financial institutions and supervisors. They are part of sound risk management. Climate-related risk constitutes an essential part of the first duty of a financial institution and a regulator — a duty to financial stability.

This autumn, the ECB is scheduled to publish a review on decarbonising its balance sheet and tilting asset purchases away from the most carbon-intensive assets. Current discussions envisage three tools:

  1. Modelling The ECB is working on improving its analysis of the economic effects of climate change. It published its first scenarios in June 2020, and will update them each year (starting next week).
  2. Disclosure The ECB intends to disclose its climate-related risks, and to impose disclosure on counterparties, which should have a powerful exemplarity effect.
  3. Operations The ECB is considering incorporating climate-related risk in the assessment of both its collateral and asset purchases, focused on corporations. Data on climate alignment could be used to progressively develop the ECB’s policy on asset purchases of corporate debt and its collateral policy.

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

Writen by Andrew Craig. The post Weekly investment update – A green swan! appeared first on Investors' Corner - The official blog of BNP Paribas Asset Management, the sustainable investor for a changing world.

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COVID-19 may never go away, but practical herd immunity is within reach

It is unlikely that we will reach full herd immunity for COVID-19. However, we are likely to reach a practical kind of herd immunity through vaccination.

The level of immunity needed — either through vaccination or infection — for practical herd immunity is uncertain, but may be quite high. (Shutterstock)

When people say that we won’t reach “herd immunity” to COVID-19, they are usually referring to an ideal of “full” population immunity: when so many people are immune that, most of the time, there is no community transmission.

With full herd immunity, most people will never be exposed to the virus. Even those who are not vaccinated are protected, because an introduction is so unlikely to reach them: it will sputter out, because so many others are immune — as is the case now with diseases like polio and mumps.

The fraction of the population that needs to be immune in order for the population to have “full” herd immunity depends on the transmissibility of the virus in the population, and on the control measures in place.

It is unlikely we’ll reach full herd immunity for COVID-19.

For one thing, it appears that immunity to COVID-19 acquired either by vaccination or infection wanes over time. In addition, SARS-CoV-2 will continue to evolve. Over time, variants that can infect people with immunity (even if this only results in mild disease) will have a selective advantage, just as until now selection has mainly favoured variants with higher transmission potential.

Electron micrograph of a yellow virus particle with green spikes, against a blue background.
The B.1.1.7 variant of the SARS-CoV-2 virus. Over time, variants of concern will likely continue to emerge. NIAID, CC BY

Also, our population is a composition of different communities, workplaces and environments. In some of these, transmission risk might be high enough and/or immunity low enough to allow larger outbreaks to occur, even if overall in the population we have high vaccination and low transmission.

Finally, SARS-CoV-2 can infect other animals. This means that other animal populations may act as a “reservoir,” allowing the virus to be reintroduced to the human population.

Practical herd immunity

Nonetheless, we are likely to reach a practical kind of herd immunity through vaccination. In practical herd immunity, we can reopen to near-normal levels of activity without needing widespread distancing or lockdowns. This would be a profound change from the situation we have been in for the past 18 months.

Practical herd immunity does not mean that we never see any COVID-19. It will likely be with us, just at low enough levels that we will not need to have widespread distancing measures in place to protect the health-care system.


Read more: COVID-19 variants FAQ: How did the U.K., South Africa and Brazil variants emerge? Are they more contagious? How does a virus mutate? Could there be a super-variant that evades vaccines?


What level of immunity (either through vaccination or infection) we need for practical herd immunity is uncertain, but it may be quite high. The original strain of SARS-CoV-2 was highly transmissible and transmission is thought to be higher still for some variants of concern.

Empty vials of Pfizer's COVID-19 vaccine
To achieve two-thirds immunity, 90 per cent of the eligible population would need to be vaccinated or infected naturally. (AP Photo/John Locher)

The amount of immunity we need will also depend on what level of controls we are willing to maintain indefinitely. Continued masking, contact tracing, symptomatic and asymptomatic testing and outbreak control measures will mean we will require less immunity than we would without these in place.

Some estimates suggest that we may need two thirds of the population to be protected either by successful vaccination or natural infection. If 90 per cent of the population is eligible for vaccination, and vaccines are 85 per cent effective against infection, we can obtain this two thirds with about 90 per cent of the eligible population being vaccinated or infected naturally.

The United Kingdom has already exceeded these rates in some age groups. Higher rates are even better, because there is still uncertainty about the level of transmissibility and vaccine efficacy against infection (although research shows they are very good against severe disease). We don’t want to discover that we do not have enough immunity through vaccination and have another serious wave of infection.

Emerging variants

A sticker reading 'I'm COVID-19 vaccinated' from Vancouver Coastal Health
Booster vaccinations will hopefully allow us to maintain long-term practical herd immunity against future variants of COVID-19. THE CANADIAN PRESS/Jonathan Hayward

Higher vaccine uptake will mean there are fewer infections before we reach practical herd immunity. The remaining unvaccinated individuals will be safer, protected indirectly by the immunity of those around them. Outbreaks will be smaller and rarer, and there will be fewer opportunities for vaccine escape variants to arise and spread.

That said, variants of SARS-CoV-2 will continue to emerge, and selection will favour variants that escape our immunity. Vaccine developers will continue to broaden the spectrum of the vaccines that are available, and boosters will hopefully allow us to maintain long-term practical herd immunity.

It’s possible that an immune escape variant will emerge that is severe enough, and transmissible enough, that it will cause a new pandemic for which we do not have even practical herd immunity. But barring that, while we may not be free of COVID-19, we can be confident that in the not-too-distant future it will be manageable when we return to near-normal life.

Caroline Colijn's research group receives funding from the Natural Sciences and Engineering Research Council of Canada, Genome British Columbia, the Michael Smith Foundation for Health Research, the Public Health Agency of Canada and Canada 150 Research Chair program of the Federal Government of Canada.

Paul Tupper's research group receives funding from the Natural Sciences and Engineering Research Council of Canada.

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UK Government Adviser Says Mask Mandates Should Continue “Forever”

UK Government Adviser Says Mask Mandates Should Continue "Forever"

Authored by Paul Joseph Watson via Summit News,

A UK government adviser and former Communist Party member Susan Michie says that mask mandates and social distancing should…

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UK Government Adviser Says Mask Mandates Should Continue "Forever"

Authored by Paul Joseph Watson via Summit News,

A UK government adviser and former Communist Party member Susan Michie says that mask mandates and social distancing should continue “forever” and that people should adopt such behaviour just as they did with wearing seatbelts.

Michie, who is a Professor of Health Psychology at UCL and a leading member of SAGE, said such control measures should become part of people’s “normal” routine behaviour.

"Vaccines are a really important part of pandemic control but it is only one part. [A] test, trace and isolate system, [as well as] border controls, are really essential. And the third thing is people’s behaviour. That is, the behaviour of social distancing, of… making sure there’s good ventilation [when you’re indoors], or if there’s not, wearing face masks, and [keeping up] hand and surface hygiene."

"We will need to keep these going in the long term, and that will be good not only for Covid but also to reduce other [diseases] at a time when the NHS is [struggling]… I think forever, to some extent…"

"I think there’s lots of different behaviours that we have changed in our lives. We now routinely wear seatbelts – we didn’t use to. We now routinely pick up dog poo in the parks – we didn’t use to. When people see that there is a threat and there is something they can do to reduce that [to protect] themselves, their loved ones and their communities, what we have seen over this last year is that people do that."

Michie’s comments once again emphasize how many scientific advisers have become drunk on COVID-19 power and never want to relinquish it.

“Unsurprisingly, Channel 5 News made absolutely no effort to scrutinise these claims. The programme’s presenter raised no objection to the idea that mask-wearing and social distancing could continue “forever”, resorting only to friendly laughter,” writes Michael Curzon.

“Professor Michie’s co-panellist, a fellow scientist at UCL, Dr Shikta Das, said:

“I think Susan has made a very good point here,” adding that the vaccine roll-out has created a “false sense of security”.

She concluded:

“I don’t think we are yet ready to unlock.”

How’s all that for balance!

Perhaps unsurprisingly, Michie is known to be a long-time Communist hardliner and was so zealous in her beliefs she garnered the nickname “Stalin’s nanny.”

Her sentiment echoes that of fellow government adviser Professor Neil Ferguson, who once acknowledged that he was surprised authorities were able to “get away with” the same draconian measures that Communist China imposed at the start of the pandemic.

“[China] is a communist one-party state, we said. We couldn’t get away with [lockdown] in Europe, we thought… and then Italy did it. And we realised we could,” said Ferguson.

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Tyler Durden Sat, 06/12/2021 - 11:30

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Venezuela Says US Sanctions Blocking COVID Vaccines: ‘Global Health System’ As Geopolitical Weapon

Venezuela Says US Sanctions Blocking COVID Vaccines: ‘Global Health System’ As Geopolitical Weapon

Authored by Brett Wilkins via via CommonDreams.org,

Venezuelan Vice President Delcy Rodríguez has accused the US-backed international financia

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Venezuela Says US Sanctions Blocking COVID Vaccines: 'Global Health System' As Geopolitical Weapon

Authored by Brett Wilkins via via CommonDreams.org,

Venezuelan Vice President Delcy Rodríguez has accused the US-backed international financial system of blocking the country's access to Covid-19 vaccines under the COVAX program, even though Venezuela has paid all but $10 million of the $120 million it owes.

Appearing in a televised address, Rodríguez said Venezuela was unable to pay the remaining $10 million because it was being blocked from transferring funds to the Switzerland-based GAVI Vaccine Alliance, which directs COVAX. "The financial system that also hides behind the U.S. lobby has the power to block resources that can be used to immunize the population of Venezuela," she said.

Via Reuters

Venezuelan Foreign Minister Jorge Arreaza tweeted a letter from COVAX stating that it "received notification from UBS Bank" that four payments, totaling just over $4.6 million, were "blocked and under investigation."

Arreaza said that "Venezuela has paid all of its commitments," adding that "the bank has arbitrarily blocked" the country's final payments and calling the situation "a crime."

The vice president and foreign minister's remarks follow accusations from Venezuelan President Nicolás Maduro last week that "organizations of US imperialism" are engaged in an effort to stop vaccine producers from selling doses to the country.

"Venezuela might be the only country in the world that is subject to a persecution against its right to freely purchase vaccines," said Maduro, according to Venezuelanalysis. "Venezuela is besieged so that it cannot buy vaccines."

A mural in Caracas symbolically shows Venezuela and Russia uniting to defeat the coronavirus, with the caption: "We will beat Covid-19 together." Image: AFP via Getty

Successive US administrations have targeted Venezuela with economic sanctions that critics say have devastated the nation's once-thriving economy and have caused tremendous suffering for the poor and working-class people whose dramatic uplift was once hailed as the great success of the Bolivarian Revolution launched under the late President Hugo Chávez. 

According to a 2019 report from the Center for Economic and Policy Research, a progressive think tank based in Washington, D.C., as many as 40,000 Venezuelans have died due to sanctions, which have made it much more difficult for millions of people to obtain food, medicine, and other necessities. 

Maduro also denounced the World Health Organization (WHO) for its role in delaying vaccine delivery to Venezuela. The president had expected "many millions" of the Covid-19 jabs to be delivered in July and August. "The COVAX system owes a debt to Venezuela," asserted Maduro. "We made a deposit in April and we are waiting for the vaccines."

That $64 million deposit to GAVI came after a rare deal between the Maduro administration and Juan Guaidó, the coup leader recognized by the United States and dozens of other nations as Venezuela's legitimate head of state despite never having been elected.

Adept at circumventing US interference in its affairs, Venezuela turned to China, Russia, and Cuba to launch its mass vaccination program, which aims to inoculate 70% of the population this year. Earlier this month, the country reached a deal to buy and locally manufacture the Russian EpiVacCorona vaccine. Venezuela has also already acquired about three million doses of the Russian Sputnik V and Chinese Sinopharm jabs, and last month began clinical trials on Cuba's Adbala vaccine.

Compared to other nations in the region, Venezuela has reported a very low rate of coronavirus infections and deaths. According to Johns Hopkins University's Coronavirus Resource Center, there have been nearly 248,000 reported cases and 2,781 deaths in the country of 28.5 million people during the ongoing pandemic. Neighboring Colombia, with just over 50 million people, has reported more than 3.6 million cases and over 94,000 deaths.

Tyler Durden Sat, 06/12/2021 - 16:30

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