Financial Markets Division Monitoring financial markets.

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Financial Markets Division Monitoring financial markets

Transcript of Financial Markets Division Monitoring financial markets.

Page 1: Financial Markets Division Monitoring financial markets.

Financial Markets Division

Monitoring financial markets

Page 2: Financial Markets Division Monitoring financial markets.

Outline

• Introduction: ourselves and Financial Markets Division

• Importance of monitoring• Monitoring sources• Monitoring subjects• Products

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Financial Markets Division

Asset Management Risk Management Treasury and Monitoring

Asset Management: investment of fx reservesRisk Management: creates framework for investmentTreasury and Monitoring: monetary policy implementation and monitoring

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Importance of monitoring

• Monetary policy: - Developments financial markets input

decision making- Expectations in markets- Assessment of policy

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Importance of monitoring

• Financial Stability (FS):

- Increased focus on FS- Monitoring risks to stability of financial system- Financial markets channel

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Importance of monitoring

• Asset Management (AM):

- Monitoring developments which impact the value of the portfolio

- Monitoring trading opportunities

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Monitoring sources

• Counterparties− Asset Management (capital market), Dealing Room (money market,

foreign exchange)

− Research & direct contact

• International economic news and data providers− Bloomberg, Reuters

− Datastream

− (Economic/financial magazines, Internet)

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Subjects: expectations

• Get indications from market prices− Dollars and EURO’s− Futures (Fed Fund & 3M Euribor), Interest Rate Swaps (EONIA), Fed Fund

Options

• Using research of market participants− Investments Banks− Research Agencies

2,00

2,25

2,50

2,75

3,00

3,25

3,50

3,75

4,00

1w 2w 3w 1m 2m 3m 4m 5m 6m 7m 8m 9m 10m 11m 12m

10-4-2007 12-1-2007 7-12-2006

Grafiek # Verwachte toekomstige overnightrente eurogebiedAfgeleid uit de EONIA Swapcurve, in procenten

Bron: Bloomberg en eigen berekeningen.

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Subjects: yield curve and exchange rates

• Yield curve dynamics− Monitoring yield curve− Development 10-year/2-year spread, comparing US and Euro area− Try to understand the market dynamics (e.g. pension funds, China, flight to

quality)

• Exchange rate movements− Euro vs dollar/yen, dollaryen− Market factors influencing the impact of monetary policy (low volatility, low

interest rates yen carry trades based on yen)− Bank of England….

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Subjects

• Which factors are moving the market in the short term− Follow news and report to the organisation− Contact counterparties (money market report)

• Special topics− Hedge funds (Parliament, ABN AMRO case)− Private Equity− Carry trades

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Monitoring

• Financial Market Dashboard− Dashboard for real time monitoring asset prices (major exchange rates,

stock indices, interest rates, bonds, oil and gold)− Special design for the board of directors

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Monitoring Products

• Daily report & Money Market report− Focus on Europe, US and Japan− Market types: Foreign Exchange, Stock Market, Bonds Market, Other (mainly

oil and gold)

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Monitoring Products

• Monthly report− Focus on monthly developments in major markets (both countries and type)− Views market participants on possible explanation, highlighting special

subjects (box)− Input for monetary Governing Council

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Monitoring Products

• Market participants view− Mainly based on research of investment banks− GDP, Inflation and interest rates (policy rates, 10 year)− Individual views and average

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Concluding remarks

Monitoring important:• Input monetary policy decisionmaking• Financial Stability issues

And of course:• Portfolio investment decisions