One way to look at the relative easing of central banks is to track the shape of the yield curve over time. This is also a good way of telling what point we are in the business cycle.
The US market has moved from being flat to upward-sloped to the tune of close to 200 basis points. There has been the most easing in the US and the threat of a recession has been the greatest.
The Canadian market has followed a similar pattern from flat to upward sloping but in a more muted fashion which is similar to what we are seeing in the Canadian economy, less decline off in growth and less aggressive easing.
Great Britain has gone from downward sloping to something that is upward sloped. The Bank of England has been working to solve the credit crisis but has stopped short of moving into a full throttled ease.
Europe like the US had almost a flat curve between 10-year and 2-year yields, but has moved to an upward slope. The ECB has been less aggressive than the US and has stated that it has every intention of focusing on price stability.
Japan has been somewhat insulated from the credit issues and has seen a stable yield curve with little change in the curve. With a new Governor of the Bank of Japan coming into office it seems like monetary policy is on hold.
Those countries which have been less aggressive with their monetary policy have seen strengthening of their currencies. The currency markets have followed closely a monetary model of exchange rate determination although the monetary driver has not shown up in monetary growth levels.
No comments:
Post a Comment