financial markets division monitoring financial markets
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Financial Markets Division
Monitoring financial markets
Outline
• Introduction: ourselves and Financial Markets Division
• Importance of monitoring• Monitoring sources• Monitoring subjects• Products
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
Importance of monitoring
• Monetary policy: - Developments financial markets input
decision making- Expectations in markets- Assessment of policy
Importance of monitoring
• Financial Stability (FS):
- Increased focus on FS- Monitoring risks to stability of financial system- Financial markets channel
Importance of monitoring
• Asset Management (AM):
- Monitoring developments which impact the value of the portfolio
- Monitoring trading opportunities
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)
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.
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….
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
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
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)
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
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
Concluding remarks
Monitoring important:• Input monetary policy decisionmaking• Financial Stability issues
And of course:• Portfolio investment decisions
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