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Ethereum Foundation Says Berlin Hard Fork Addressed ‘Clear and Present’ Threat
Bloomberg
(Bloomberg) – With the world barely through the worst of an unprecedented crisis, central bankers are already wondering if the next one is around the corner.From Washington to Frankfurt, what began months ago as a murmur of concern has morphed into a chorus as officials ask if a risk-taking binge across multiple asset markets might presage a destabilizing rout that could derail the global recovery.Just last week, the European Central Bank and the Bank of Canada cited mounting threats, cognizant of the retrenchment that ensued during the 2008 financial crisis. Meanwhile Bitcoin’s dramatic swings after a warning about cryptocurrencies from the People’s Bank of China showcased how sensitive some markets have become.Pessimists at global monetary institutions can find bubbles almost anywhere they look, from equities to real estate, while officials such as Federal Reserve chief Jerome Powell argue any threats remain contained.Central banks bear some responsibility for financial-market fervor after huge doses of stimulus and liquidity injections to keep economies afloat. The resulting buoyancy is at least partly a euphoria effect, applauding a snap back in growth whose scope can only be guessed at – with eventual repercussions judged to range from a benign boom to an inflationary spiral.“Where we do see more exuberance is around growth expectations,” Max Kettner, a strategist at HSBC Holdings Plc, told Bloomberg Television. “Particularly in the U.S. they’ve been raised to an enormous degree. So that is, I think, the exuberance.”Market speculation has led to heavy volatility of late, including wild girations and drops in Bitcoin from an all-time high above $60,000 in April. More traditional assets are struggling too, with rates on haven German bonds, for example, climbing around 50 basis points this year, closing in on breaking into positive territory for the first time in more than two years.Kettner’s mention of “exuberance” followed the European Central Bank’s use of similar words on Wednesday, echoing former Fed Chairman Alan Greenspan’s 1996 observation of “irrational exuberance” before the dotcom bubble.The euro-zone institution observed the threat of economic spillovers from, for example, a U.S. equity-market correction. Bank of Canada officials voiced similar concerns a day later, and highlighted the housing market as expectations of continuing price increases fuel purchases.Three weeks earlier, a Fed policy meeting veered into a debate on stability, where participants observed “elevated” risk appetite and discussed dangers posed by hedge fund activity. In a subsequent report, they warned of “vulnerabilities” and “stretched valuations,” exacerbated by high corporate debt.Meanwhile Bank of England Governor Andrew Bailey recently wondered aloud if speculation in stocks and Bitcoin might themselves be a “warning sign.” And a Norwegian official said that cryptocurrency volatility could threaten lenders if their exposures keep rising.Central banks have had nagging concerns for a while. Already in January, ECB markets chief Isabel Schnabel told colleagues that stocks could become vulnerable to “more broad-based repricing.”In China, with a recovery cycle more advanced than the U.S.’s, the top banking regulator revealed in March that he was “very worried” about bubbles, specifying “very dangerous” real-estate investing.That might be partly what UBS AG Chief Executive Officer Ralph Hamers had in mind in late April with his own alarming view. Noting “bubbles in some asset classes,” including real estate, he told Bloomberg Television that “we are getting close to the peak of things.”Some senior central bankers are trying to be sanguine despite flashing warning lights. After the Fed decision in April, Powell insisted that “the overall financial stability picture is mixed but on balance, it’s manageable.”ECB Vice President Luis De Guindos – whose job includes preparing his institution’s threat assessment – dialed down from its worried tone last week by saying economic risks are “much more balanced than in the past.”The difficulty for central banks is in managing the consequences for asset prices of their monetary policies, a challenge that has bedeviled them since the 2008 calamity. Periodically, that makes institutions such as the Fed the target of criticism.“Central banks are desperately wanting to make sure, be certain,” said James Athey, investment director at Aberdeen Asset Management Plc. “It also means they keep policy way too easy for way too long.”The alternative officials face is to dare to wind down stimulus, taking on the risk of choking an economic recovery with a corresponding cost to livelihoods.Iceland took that plunge last week, delivering the first policy tightening in Western Europe with an interest-rate increase to contain inflation and a rampant housing market.The larger euro area, whose constituent regions vary from some of the world’s most prosperous to examples of perennial malaise, can’t be so nimble. That’s why the ECB recommends “more targeted” fiscal support for companies while avoiding stimulus withdrawal.Similarly, the Fed cited use of macroprudential tools as important to allow monetary policy to take its course. JPMorgan economists wrote this month that they anticipate Australia’s banking regulator will “formalize” debt and loan-to-income restrictions soon.However central banks and financial regulators respond to ebullience, they know the stakes are as high as ever, with the need to cement a rebound from a severe crisis in a world which will struggle to tolerate another one.At least officials can take comfort in recognizing a more familiar pre-pandemic environment: The last time their worries about risk were so synchronized was in November 2019, just weeks before the coronavirus began to cripple the global economy.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Ethereum: All You Need To Know To Decide If This Crypto Is Worth the Investment
Bloomberg
(Bloomberg) – As the hunt for investments that can withstand rising interest rates gathers pace, frontier assets are gaining popularity over their larger emerging-market peers.The bonds of the world’s least-developed economies have returned 2.6% this year, keeping pace with their 2020 performance, while higher-ranked emerging-market debt has lost almost 2%, reversing some of last year’s 5.3% advance, according to JPMorgan Chase & Co. indexes.With speculation growing that the world’s post-pandemic economic recovery is fueling inflation, the bonds of smaller developing nations are luring buyers as their securities tend to be of shorter duration – meaning they are less sensitive to expectations for interest-rate increases. The average duration of frontier-market sovereign bonds is six years, compared with 7.9 years for traditional emerging markets, JPMorgan indexes show.“People are still worried interest rates have to rise and they are looking for yield and interest-rate duration,” said Leo Hu, who co-manages the $7 billion Emerging Markets Debt Hard Currency Fund at NN Investment Partners in Singapore. Frontier bonds may return at least 9% in the next 12 months, he said.The burgeoning interest in frontier assets nonetheless represents a threat to the global economy as central banks move back into policy-tightening mode. Less developed nations, such as those in Africa, present a higher chance of default than their larger emerging-market peers. And the more funds they attract, the greater the threat of potential contagion should rising borrowing costs hamper economic growth.Into AfricaIn terms of geography, money managers who specialize in frontier assets are almost united in favoring Africa, saying the region will benefit the most from rising raw material prices. These include Angola, Ghana and Zambia – even though the latter became the first African country in the Covid-19 era to default when it skipped a Eurobond payment last year.Zambia has benefited as copper has risen to record highs, with demand bolstered by the global recovery and the transition toward green energy. The metal accounts for almost 80% of Zambia’s export earnings. The nation’s dollar debt has returned 24% this year amid prospects of an International Monetary Fund bailout, second only to Ecuador among the roughly 75 emerging markets tracked by Bloomberg Barclays indexes.Angola, Africa’s second-biggest oil producer, is another favorite. A slide in crude prices last year triggered by the pandemic led the country to seek $6.2 billion of relief from its major creditors, easing fears of a default in one of the continent’s most-indebted countries. Angola’s bonds have returned 12% this year, according to a Bloomberg Barclays index.African bonds also stand out from their peers in terms of yields. Ghana’s 2025 securities currently yield 6.3%, while similar-maturity Angolan debt yields 7%, according to data compiled by Bloomberg. That stands in contrast to traditional emerging markets. The 10-year bonds of Indonesia yield just 2.4%. Mexico’s yield 3.1%.“We have been allocating more to frontier sovereign credits,” said Jens Nystedt, a fund manager in New York at Emso Asset Management, a specialist on fixed-income investments in emerging markets overseeing $6.8 billion. “In particular, we like the outlook for Nigeria, Ghana and Angola given that they would be some of the main beneficiaries from higher oil prices.”Bailout ProgramSentiment toward frontier markets was also boosted this year after the International Monetary Fund announced a plan to create $650 billion in additional reserve assets to help developing economies cope with the pandemic.IMF support has been crucial for the likes of Pakistan, which raised $2.5 billion in March after the resumption of a $6 billion bailout program. Ecuador’s new government plans to reach a deal with the IMF to ensure financial stability and unlock some of the funds related to the $6.5 billion financing agreement reached last year.Frontier-nation bonds offer higher yields for a reason – they are judged to have a higher chance of default. But many fund managers aren’t deterred.“There are quite some risks, such as the worsening of the pandemic or too much stimulus, but we stick with the rosier scenario for frontier markets,” said Edgardo Sternberg, co-manager for emerging-markets debt portfolios in Boston at Loomis Sayles & Co., which oversees $3.5 billion of developing-nation bonds. “Frontier markets should continue to outperform,” he said.Central bank meetings in Nigeria, Kenya and Angola will be in focus this week. Elsewhere, policy makers in Indonesia and South Korea will also decide on interest rates.Rates on HoldNigeria is likely to keep its key interest rate unchanged on Tuesday as the fragility of its economic recovery outweighs concerns about inflation, which remained more than double the the bank’s official target ceiling in AprilMonetary authorities in Kenya and Angola are also expected to hold rates on Wednesday and Friday, respectivelyWhile central banks in Indonesia and South Korea will also likely keep rates steady this week, the focus will be on the signs for a change of tack in the months aheadOn Tuesday, traders will be watching to see if Bank Indonesia prioritizes currency stability over supporting growth amid concerns over a quickening in global inflation and the country’s slow pace of vaccinations. The rupiah was Asia’s worst-performing currency last week and the nation’s sovereign bonds extended lossesOn Thursday, the Bank of Korea’s forecasts for growth and inflation will be in focus as the central bank updates its economic projectionsWhile Colombia’s central bank will convene on Friday, the gathering is not a monetary policy meeting, according to Bloomberg EconomicsInvestors will watch for further market impact in Colombia as the nation faces more credit downgrades, which would solidify its loss of investment-grade statusEconomic DataChina’s industrial profits probably continued to log a double-digit growth rate in April, although the pace may have slowed from March, according to Bloomberg Intelligence. Faster factory-gate inflation was likely a support as well as strong exports, economists including Chang Shu wrote in a noteThe onshore yuan is holding close to its strongest level since 2018 amid an improving outlook for China’s economy. It’s on track to become the best-performing currency in Asia this month after India’s rupeeChinese debt is similarly outperforming all emerging-market peers; the benchmark 10-year sovereign yield has fallen nine basis points year-to-dateData due Monday is likely to show Taiwan’s April industrial production grew at the fastest pace since January while unemployment might have edged down to 3.7%, the lowest in over two yearsThe Taiwan dollar has remained resilient in recent weeks, supported by strong demand for the nation’s exports, even as a worsening Covid-19 outbreak has forced authorities to widen a lockdown to the entire islandInvestors will also get an update on how the region’s trade sector is improving, as figures from Thailand and Malaysia are due Tuesday and Friday, respectivelyIndustrial production and inflation numbers from Russia will come under scrutiny, with the ruble beating most of its peers in the past month on the prospect of more policy tightening. The data come Tuesday and Wednesday, respectivelyMexico’s bi-weekly inflation reading due Monday is expected to show a decline in the first half of MayOn Wednesday, traders will monitor final first-quarter gross domestic product data for any changes versus last month’s estimateBloomberg Economics expects the release of minutes on Thursday from the latest central bank meeting to reflect a less dovish toneBrazilian IPCA consumer price inflation data for May, scheduled for Tuesday, will probably see an uptick amid higher electricity prices, according to Bloomberg EconomicsInvestors will watch current-account figures for April on Wednesday for signs that a strong trade surplus boosted the balance. Unemployment numbers the next day may reflect increased restrictions in March as infections rose.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.