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Daily Agenda: Policymakers Fret over Brexit

Bank of Japan, Fed hold tight as Indonesia’s central bank cuts again; gold surges on Brexit fears.

The yen surged to its highest level versus primary reserve currencies in more than 18 months this morning after the Bank of Japan announced no change in monetary policy. Bank governor Haruhiko Kuroda reiterated that he and his colleagues were willing to act if required — a message that sent Japanese government bond yields to fresh lows. The Bank of Japan decision came on the heels of the decision yesterday by the Federal Open Market Committee to refrain from tightening over fresh concerns sparked by the June 23 referendum on the U.K.’s membership in the European Union. While developed-world central bankers have seen fit to stand pat this week, at least one emerging economy central bank has taken action. For the fourth time this year, Bank Indonesia governor Agus Martowardojo announced a rate cut, lowering the reference rate by 25 basis points as deflationary pressures persist in Southeast Asia.

Gold surges. Bullion traded higher for the seventh consecutive day in London as concerns over the upcoming Brexit vote incited a flight-to-safe assets. Spot prices for the precious metal reached the highest level in almost two years at more than $1,304 per ounce. Separately, exchange-traded funds that hold precious metals have seen the strongest inflows in years over recent weeks.

Swiss 30-year bond yields turn negative. For the first time, yields on Swiss government debt with a 30-year maturity reached negative levels as concerns over the impact of a possible Brexit roils bond markets. Almost all government-issued debt in Switzerland now trades at or below zero yield.

Bank of England warns on exit. As had been expected according to consensus forecasts, the Bank of England’s Monetary Policy Committee left rates unchanged during the monthly rate announcement. Governor Mark Carney and his fellow committee members used the opportunity to warn about the potential ramifications of a departure from the EU. According to the MPC statement a Brexit would result in a “materially lower path for growth.”

Foreign investors dump Treasuries. Data released by the U.S. Treasury Department revealed that foreign investors liquidated a record amount of Treasury bonds in April with more than $74 billion sold back to domestic buyers. Of that amount roughly $60 billion was accounted for by private investors, while the remainder represented sales by central banks and other government institutions.

Biggest IPO of the year on the way. Postal Savings Bank of China is preparing for an IPO, which may prove to be the largest year to-date. According to a report in The Wall Street Journal today, the state-controlled entity will list in Hong Kong in the coming weeks with a potential capital raise of a planned $7 billion to $10 billion. According to unnamed sources, the placement will represent a 20 percent ownership stake in the bank.

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