Financial markets believe that the U.S. is likely to fare better than most other major economies in an all-out trade war. This is because (i) international trade accounts for a smaller share of U.S. business activity, (ii) the U.S. imports far more than it exports, and (iii) the U.S. now well outperforms other major economies. Nevertheless, though the U.S. is better able the withstand the direct and collateral damage of a trade conflict, it is still expected suffer casualties in a trade war. And such casualties might well influence the outcome of November's Congressional elections.
Moody's Analytics, a leading financial intelligence firm, announced today that its technology has been selected by Allianz Suisse.
BCBS revised the assessment methodology for global systemically important banks (G-SIBs), along with the higher loss absorbency (HLA) requirement.
According to Moody's Capital Markets Research Group, second-quarter 2018's outstandings of Moody's-rated U.S. corporate bonds excluding ABS and MBS rose by 3.3% year-over-year to $7.212 trillion, which was a slight 0.6% under first-quarter 2018's record high of $7.259 trillion. The second quarter's yearly increase of 3.3% was much slower than the 6.3% yearly increase of 2018's first quarter and was the smallest since the 2.1% of 2015's final quarter. The -0.6% dip by U.S. corporate bonds outstanding from the first to the second quarter of 2018 was only the third such sequential decline by the rated outstandings of U.S. corporate bonds during the past five years. The other two quarterly retreats were those of 0.2% of 2016's final quarter and 5.7% in 2015's final quarter.
IOSCO proposed the good or sound practices to assist relevant storage infrastructures and their oversight bodies to identify and address issues that could affect pricing of commodity derivatives and in turn affect market integrity and efficiency.
FSB published a draft Cyber Lexicon for public consultation. The Cyber Lexicon comprises a set of 50 core terms related to cyber security and cyber resilience in the financial sector.
BCBS approved a technical amendment on the treatment of extraordinary monetary policy operations in the net stable funding ratio (NSFR).
IAIS is consulting on the revised Insurance Core Principles on Changes in Control and Portfolio Transfers (ICP 6) and on Public Disclosure (ICP 20).
IAIS published a draft application paper on the supervision of insurer cybersecurity. The application paper provides further guidance to supervisors seeking to develop or enhance their approach to supervising the cyber risk, cybersecurity, and cyber resilience of insurers.
BCBS, on March 22, 2018, launched a consultation on revisions to the minimum capital requirements for market risk.
Let's start with the good news of operating profits' much faster rise relative to the growth of corporate debt. During 2018's first quarter, the 9.7% year-to-year advance by the pretax operating profits of U.S. nonfinancial corporations far outran the accompanying 5.2% increase by nonfinancial corporate debt. Moreover, for the year-ended March 2018, operating profits' 7.2% increase also outpaced the 5.9% growth of corporate debt. In turn, the moving yearlong ratio of debt to operating profits for nonfinancial corporations eased from third-quarter 2017's cycle high of 699% to the 691% of 2018's first quarter.
IAIS published its newsletter describing the activities and achievements this month.
In this webinar, Mark Zandi and the Moody's Analytics team discuss recent changes to our Global Macroeconomic Model, and provide an overview of Scenario Studio, our new platform for custom scenario development. Learn more: www.moodysanalytics.com/scenariostudio
The FSB Plenary met in Basel to discuss risks and vulnerabilities from market developments in the global financial system and progress against its 2018 workplan for delivery to the Argentine G20 Summit in November.
BIS separately published the annual report and the annual economic report for 2017–18. The annual report provides a description of its activities, governance, and organization, along with its annual financial statements for 2017–18.
IASB published the updated work plan, along with the updates on its June meeting and on its joint meeting with the FASB, which was held on June 19, 2018.
FSB published two guidance documents to assist authorities in implementing its Key Attributes of Effective Resolution Regimes for global systemically important banks (G-SIBs).
BCBS published the progress report on the implementation of the principles for effective risk data aggregation and reporting by banks.
Since June 14's close, or immediately prior to the latest bout of trade-related stress, the cumulative 0.8% decline by the market value of US common stock has been shallower than the accompanying 2.7% drop by the blue-chip Dow Jones Industrial Average. By comparison, China's Shanghai Composite stock price index incurred a much deeper setback of 5.5%. The latest installment of trade friction has yet to roil all financial markets. The recent VIX of 14.2 points remained well below its long-term median of 15.9 points notwithstanding heightened financial market volatility.
BIS published panel remarks by Luiz Awazu Pereira da Silva, the Deputy General Manager (DGM) of BIS, at the CV Meeting of Central Bank Governors of CEMLA, on June 05, 2018, in Paraguay.
Benefits of CreditLens
May 2018's 52% year-to-year plunge by US$-denominated high-yield bond issuance to $20.96 billion grossly understated the overall pace of borrowing by high-yield companies. In stark contrast, May 2018's newly-rated bank loan programs graded Baa or lower soared higher by 52% from a year earlier to a record $104.64 billion. The latter surpassed January 2017's former zenith of $91.42 billion and was well above November 2007's $81.80 billion high of 2002-2007's business cycle upturn. By December 2007, the Great Recession was officially under way.
While speaking in Brussels, Dietrich Domanski, the Secretary General of FSB, examined the recent and expected developments in the area of recovery and resolution of banks.
IASB published an article on preparing the market for the IFRS 17 standard on insurance contracts.
Perhaps the speed at which GDP grows relative to debt matters more than the ratio of debt to GDP. The faster GDP grows relative to debt, the lower might be the risks surrounding the repayment of debt obligations. Expressed differently, the greater the return from debt capital, the lower should be the incidence of delinquencies, charge offs, and defaults. When productively employed, debt capital can more than pay for itself. The U.S.' ratio of private and public nonfinancial-sector debt has soared from 1968's 131% to 2017's 253% of 2017. Nevertheless, the 10-year average annualized growth of U.S. real GDP decelerated from the 4.9% of the span-ended 1968 to the 1.4% of the span-ended 2017.
FSB published a call for public feedback on the technical implementation of its total loss-absorbing capacity (TLAC) standard for global systemically important banks (G-SIBs).
The FSB RCG for Americas discussed sovereign risk, regtech, crypto-assets, and work to reduce misconduct risk at its recent meeting in Asuncion, Paraguay.
FSB launched the third thematic peer review on resolution regimes for banks. The review aims to evaluate implementation, by FSB jurisdictions, of the resolution planning standard set out in the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions and in associated guidance in relation to banks.
FSB published responses to the second consultation on governance arrangements for the Unique Product Identifier (UPI).
Notwithstanding the occasional jarring setback, the market value of U.S. common stock need only rise by 4.8% in order to return to its record high of January 26, 2018. Such a recovery appears to be well within reach if profits grow. Moreover, the realization of the projected decline by the U.S.' high-yield default rate from April 2018's 3.7% to 1.5% by April 2019 implies a firming of corporate finances that can only facilitate a recovery by share prices.