Monetary Policy

The average yield of the bond market today is 1.46%, while its average duration is 7.05 years, going by the widely used proxy of the Barclays Multiverse Index.

Since the two anti-establishment parties (The League and Five-Star) formed a coalition and took control in Italy, markets have been uncertain on the domestic government policy that was promising many things to many people and ultimately creating considerable friction with the European Commission (EC).

It was a dramatic night last night as the Fed cut interest rates by 25bps, the first cut since December 2008, along with the premature ending to the balance sheet run off – however markets hardly moved!

Over the past few weeks there has been a noticeable increase in high yield new issuance, bringing a welcome flurry of activity to what has so far been a relatively benign year.

The euro area bank lending survey for the second quarter of 2019, released yesterday, suggests European banks are becoming more cautious and beginning to tighten lending criteria to various parts of the economy.