Trending with Institutional Investors
Global Macro
The articles on this page reveal the topics that are receiving the most traffic from investors inside RFPnetworksTerminal, within one sub-asset class.
Each article summarises the key themes that investors are researching based on their engagement with content and or their search queries for that topic. These can be early signals of portfolio changes or new searches.
What is the ECB Transmission Protection Instrument (TPI)?
Clear Objectives. Limited Detail.
The ECB's new Transmission Protection Instrument (TPI) is still light on detail, but the objectives are clear.
The main focus of research in our fixed income feed was the ECB's new Transmission Protection Instrument (TPI). Most research was positive on this anti-fragmentation tool and it's clear objective - an unlimited bond buying backstop to facilitate the transmission of monetary policy across the EU. However, details on how it would work in practice with respect to peripheral countries, and particularly Italy, remain less clear.
Related to this theme was the ECB's decision to raise rates last week by 50 basis points. Almost all managers expected 25 basis points based on the forward guidance. As such, many managers are now questioning the credibility of forward guidance in an inflationary world.
Lots of questions remain.
Global Macro
We see danger ahead. Markets are still too high, and protection is expensive in an increasingly nervous world; common sense suggests one should invest conservatively, and in safe assets. In a world where people find themselves without the ability to pay commitments as they arise, forced selling drives prices. Among risky assets like equities, one of the counter-intuitive things in a liquidity crisis is that securities perceived as safest and most liquid go down sharply, because investors are forced to sell what they can, not what they want to. We therefore regard plentiful liquidity in the portfolio as overwhelmingly attractive; it allows us to make the most of the opportunities that arise in the aftermath of a crisis. But first we have to get through the storm.
The thought that central bankers can do much to change the broad sweep of inflation is, in my view, far-fetched. Lowering interest rates and keeping them down ensured that, in the aftermath of the 2008 crash, the world escaped a dislocative deflationary recession, and experienced instead a reprieve from deflation. Their actions, however, had an inevitable consequence: the onset of a virulent inflation. This was perfectly predictable at the time, and, indeed, we predicted it.
There was, however, no money to be made from the insight that money had lost stability post-2008 – the car would swerve maybe towards deflation, maybe towards inflation, but the final result would certainly be inflationary, because the authorities’ obsession was (and is) to avoid deflation. The game changer was to be rightly prepared for inflation, and for the last ten years, we have been. To call it too early is, in our book, to call it on time.
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