NEWSLETTER of September 15, 2023

The following content has been added at finexpert:

BlackRock
GLOBAL CREDIT OUTLOOK: A HIGHER COST OF CAPITAL
After a volatile end to 1Q 2023 – owing to disruptions in the banking system – 2Q 2023 proved to be relatively more benign than what many market participants anticipated. This was evident in economic data that surprised to the upside as well as higher market valuations for risk assets. But the lack of progress on taming inflation in 2Q 2023 sets the stage for an even higher cost of capital environment in 3Q 2023 and beyond, as central banks remain focused on restoring price stability. >more

Thinking Ahead Institute
THE WORLD’S LARGEST PENSION FUNDS – 2023
Assets Under Management (AUM) of the top 300 pension funds total US$20.6 trillion, having reduced by 12.9% in 2022, down from 8.9% growth the previous year. Volatility and uncertainty in the global economy have been at their highest in a generation. High inflation and higher interest rates disrupted equity and bond markets worldwide piling the pressure on pension funds to adapt their strategies. Operating in this “all change” environment requires strong governance which is crucial for pension funds to maintain long-term stability. >more

EY
HOW CAN BOLD CFOS REFRAME THEIR ROLE TO OPTIMIZE PERFORMANCE?
CFOs driving more innovative change agendas in their finance function can unlock greater value and performance. A minority of finance leaders plan to pursue a bold transformation agenda over the next three years. Supported by a high-performing finance function, CFOs can reconcile the three critical paradoxes that shape success in their role. >more

Bundesverband deutscher Banken
UNTERNEHMENSFINANZIERUNG AKTUELL: 2. QUARTAL 2023
Credit demand remained weak in the 2nd quarter of 2023. The total volume of outstanding loans grew by 0.3% quarter-on-quarter to €1,140 billion. Banks are available for financing. According to the Bank Lending Survey, lending has tightened only slightly recently due to increased market risks. Interest rates have moved to a significantly higher level as a result of monetary policy. >more

POPULATION AGING AND BANK RISK-TAKING
Sebastian Doerr, Gazi Kabas, and Steven Ongena
2023
What are the implications of an aging population for financial stability? To examine this question, we exploit geographic variation in aging across U.S. counties. We establish that banks with higher exposure to aging counties increase loan-to-income ratios. Laxer lending standards lead to higher nonperforming loans during downturns, suggesting higher credit risk. Inspecting the mechanism shows that aging drives risk-taking through two contemporaneous channels: deposit inflows due to seniors’ propensity to save in deposits; and depressed local investment opportunities due to seniors’ lower credit demand. Banks thus look for riskier clients, especially in counties where they operate no branches. >more

EMPIRICAL EVIDENCE ON THE STOCK-BOND CORRELATION
Roderick Molenaar, Edouard Senechal, Laurens Swinkels, and Zhenping Wang
2023
The correlation between stock and bond returns is a cornerstone of asset allocation decisions. The correlation can move considerably over time, which can have a large impact on portfolio construction. Our empirical evidence points to inflation and real returns on short-term bonds, and the uncertainty surrounding inflation as important factors for understanding the sign and magnitude of the stock-bond correlation. Our historical analyses across countries suggest that our findings are robust. We apply these insights to analyze the implications of a shift in stock-bond correlation regime for the risk of multi-asset class portfolios and for bonds risk premia. >more