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Weekly Insight: Hedging G20 bets

Negative-yielding debt hits a fresh record high of over $13 trillion; 75% of that is safe-haven government bonds; Low borrowing costs could provide some breathing room for EMs with high government financing needs; Climate change risks aren’t just domestic: over $29 trillion of G20 (mostly G7) cross-border investments are at risk. With awareness of these risks on the rise, our Green Flows Tracker shows net inflows of $2bn in Q2 (and record inflows for June); Insurer perspectives on LIBOR transition: the regulatory framework for EU insurers still requires a LIBOR-based term structure as the discount rate for insurance obligations.  

Leveraging Technologies to Improve the Quality and Maximize the Productivity of Agent Models

This brief examines the role of technological innovation as a potential driver for improving the quality and maximizing the productivity of agent models through in-depth interviews with industry experts and senior bank officers, and supplemented by a review of the literature.

Proposed tailoring of enhanced prudential standards for FBOs in the US

In our letter we emphasize the importance and contribution of FBOs to the US financial system and we highlight how the scale of the FBO operations has declined significantly since the initial FBO Rules.

Global Macro Views: The EM Capital Flow Picture ahead of the G20

Real money flows into EM stocks and bonds have surged recently, perhaps in anticipation of a benign outcome to China-US trade talks. Our daily tracking estimates flows into non-China EM at $23 bn in Q2. Our measure of China’s “core” current account surplus remains healthy, but additional US tariffs could tip the balance and cause RMB to fall.

Kuwait MSCI upgrade: Positive signal, but no time for complacency

Addition to the MSCI EM Index would acknowledge capital markets reform and send a positive signal to investors. We expect foreign inflows of $1.8 billion from passive investors and up to $7 billion from active investors in 2020-2022.

LatAm Views: Mexico Trip Notes

Bearish sentiment stems from policy concerns. Key risks are Pemex’s fragility and US tensions. Weakening growth will make fiscal targets challenging to meet and add pressure on the central bank to ease monetary policy. Market discipline and a robust macro framework should help limit policy slippage. 

Economic Views: EM External Financing Needs

Our assessment of EM current accounts is benign, with large deficits just in South Africa and Colombia. However, still high debt amortization calls for caution. This is especially the case in Turkey and South Africa.
Resident outflows are a risk in Turkey and Argentina, despite much lower deficits due to import compression.

Morocco: Seeking to Shift into Higher Gear

Neglect of structural distortions has prevented Morocco from matching its more successful EM peers in raising its standard of living. 

FRT Episode 40: SEB CEO Johan Torgeby

FRT visits SEB CEO Johan Torgeby in Stockholm, to discuss Open Banking, Artificial Intelligence, advising new high-tech clients, and the emergence of Sweden’s cashless economy (with Brad Carr).

ASEAN Economic Views -- Import Compression: Unraveling Growth Outlook

High import content in export production and investment is evident across the region. Recent import compression should support current account positions amid weak exports. However, the multiplier effects of import plunge on investment will likely depress GDP growth.




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