Required reading this morning from Gillian Tett:
Somewhere in the bowels of the mighty European Central Bank, there is a number that many investors would give a lot of euros to see.
It refers to the volume of Greek government bonds that are now sitting in the ECB’s coffers, after being lodged there by European banks through central bank repo operations.
Sadly, the ECB considers this number far too “sensitive” to release, even after a delay. Nevertheless, as fears about sovereign risk rise, those hidden data are assuming ever-greater importance.
In an increasingly illiquid secondary market for bonds, it matters greatly who is holding the Greek stock. They might have trouble reselling – especially if ratings downgrades continue, imperilling the eligibility of Greek bonds for the ECB. Read more
Ever since I wrote on this blog that the Bank of England’s Inflation Report fan charts are “rubbish” and do not reflect the underlying forecast or message the Bank wanted to give, insiders have said the post was undiplomatic and peevish. I would have to plead guilty to this criticism, but in mitigation would say that the outburst was born out of frustration after five years of quiet and private suggestions had absolutely no effect.
The challenge is to find a way of presenting the Bank’s economic forecasts in a way that reflects the the full range of possibilities and uncertainties in its economic predictions, is consistent with the decision-making by the Monetary Policy Committee, is possible to present relatively simply so that it can be widely understood and is taken at face value by those outside the Bank.
Without going into the reasons why the fan charts fail again, the consequences of their inadequacy are pretty serious for the Bank and the Monetary Policy Committee. Informed, intelligent people with no axe to grind no longer understand the Bank’s thinking and have begun to suspect its motives. Over the past week or so, two examples stand out. But these are far from isolated example. Read more