Will the next Fed meeting’s decision really make a difference?

So now we're all on tenterhooks until 18th Sept.

So now we're all on tenterhooks until 18th Sept., when we hear if the Federal Reserve has decided to reduce, (‘taper’), its monthly bond purchases. Traders, Treasurers, pension pot holders, emerging market Finance Ministers-this is what we’ve been waiting for since Bernanke first warned us in May/June it may be coming.
However, this certainly will be no surprise-this is not 1994 with its surprise Fed hike and bond market rout. The Fed has done a fantastic job of delivering an unpopular message-the start of the end of cheap money-in a manner designed to cause the least possible market volatility, and maybe the still buoyant level of the S&P 500 is eloquent testimony to their success. The reasons for the S&P's resilience are important.
Developed market countries' stock markets have retained their poise because US bonds yields have been going up for a good reason-and that is the return of growth and optimism, not just in the US, but also in Europe and China. The rise in 10-yr US Treasury yields from 1.4% to 3.0% is best described as a healthy normalisation, as it has been driven by a reduction in the all-pervading fear which has gripped the market since the Lehman bankruptcy, first, and then the emergence of the Eurozone crisis, once the depth of Greece's fiscal mess became clear.
This basic human response to seek safe-haven has played an equally important part as that of QE in keeping yields subdued.
Only in the last six months have we started to return to the 'normal' modus operandum, in which long term yields are the sum of compounded short rates and the risk premium, the latter being investors' judgement of future liquidity, credit, and fiscal and monetary policy uncertainty over the life of the bond.
Paradoxically, desperate safe-haven flight far outweighed those factors for US Treasuries, and collapsed the risk premium. We have now returned to a normal state of affairs, with the Eurozone crisis also contained, as we all belatedly came to appreciate that political will would easily overcome any economic maladies.
This has lead me to the scary conclusion that while the FOMC's pronouncements on 18th may prompt a temporary rally in US Treasuries, (especially as there is a 50 per cent probability that they will lower the employment threshold for rate rises from 6.5 per cent to 6 per cent), but that will be a great opportunity to sell bonds.
This is a bond bear market-and companies like Verizon are very wise indeed to lock in cheap borrowing. Growth is on the rise worldwide, (even rather anaemically in Europe), and I'm afraid the Fed won't have any room for hesitation driven by concerns over the effect of tapering on emerging markets, as was made abundantly clear by a couple of senior Fed officials at the Jackson Hole conference. No wonder; the Fed-haters in the Senate would have a field day if the FOMC seemed to be managing other countries' economies for them. (Of course, those Senators give no thought for the potential negative feedback effects that an EM crisis could have on the US).
Let's say the Fed doesn’t actually taper QE at all, that will send stock markets soaring and give business confidence another boost-quickly pushing yields higher anyway.

Ben Bernanke Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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How a dark night for Paris was made easier by British messages of support

The French Ambassador to the UK reflects on the Paris attacks, and how Britain's response helped make the aftermath more bearable.

I was at a dinner with members of London’s French community when news of the 13 November attacks in Paris first reached me. Our initial reaction – one that I think was shared the world over – was of shock. Young people, out on a Friday night, doing normal things that young people do: chatting, laughing, drinking, dancing. Enjoying the pleasures that are their right, in a city that lives and breathes music, conversation and, above all, liberty.

I felt a tragic sense of déjà vu as I followed the events unfolding on television. Less than a year ago, our country was attacked by murderers and fanatics who wanted to destroy the values that we hold dear. And again on 13 November, I watched as France fell victim to another cowardly and barbaric attack on its way of life.


Fraternité, solidarité

The grief that was shared by the French community here in London was made easier to bear by the messages of support that flooded in from around the country – if anything, even more than after the Charlie Hebdo attacks. I received countless phone calls, emails and letters from British friends, dignitaries, members of the public and faith groups, all conveying sympathy and friendship. I was particularly touched by a statement presented to me by representatives of 140 leaders of the Muslim community.

None was more powerful than the football match between England and France at Wembley, just four days after three suicide bombers blew themselves up outside the Stade de France in Paris. Never has the word “friendly” taken on such a literal meaning. It wasn’t about the football that night; it was about coming together and showing that we won’t live in terror. There have been so many stirring renditions of the French national anthem these past weeks – not least that of the French bass Nicolas Courjal following my appearance on The Andrew Marr Show – but the singing of La Marseillaise by the whole stadium, including the Prime Minister and Prince William, really did move me. I think the front cover of the Metro the next morning summed it up best: “England. France. United.”


Fitting tributes

The embassy in London was a focal point for many who wanted to show their support in the wake of the attacks. A sea of flowers and candles quickly formed outside, with a constant stream of people coming to sign the book of condolence that has now been sent to Paris. Once again, the British people showed that we can count on them in difficult times. I led a minute’s silence alongside the Home Secretary, Theresa May, which was observed all around the country in memory of the victims of the attacks.

Her presence was fitting, given the close relationship that our respective home secretaries have built. There are constant exchanges between the French and British security services, for the threat of terrorism is not faced by France alone. The whole of Europe must ensure that stronger security measures are put in place. We wish to preserve Schengen and the border checks are only temporary measures. But the external border needs to be much more secure and European border guards need to be present.


Beyond Calais

I’m glad that, after a tough summer, our message that Calais is only one part of a Europe-wide migrant crisis seems to have got through. The kind of criticism I heard in July, when I was asked time and again by the press why France wasn’t doing more to prevent migrants crossing the tunnel, is now much rarer. Indeed, Franco-British co-operation has been effective in Calais. But the “Jungle” is still there, inhabited partly by people who would qualify for refugee status and who will need to be taken care of. France is already doing a lot in that regard.


Current climate

Migration was on the agenda last week at the London School of Economics, where I opened a conference on its link with climate change, the last in a series of Franco-British events that the embassy has held in the run-up to the UN climate summit in Paris, which starts on 30 November. Life has to go on as normally as possible after the atrocities. Any­thing else would be a victory for the terrorists. The sense of momentum ahead of the summit is strong and hasn’t been diminished by the attacks. If anything, the sense of urgency is greater than ever. This summit is about securing the future of humanity – what could be more important than that?

Nuclear energy is one of the ways we can reduce CO2 emissions. President Xi Jinping of China’s recent visit to the UK resulted in decisive steps being taken towards the building of a new nuclear plant at Hinkley Point by the French company EDF. This project will provide secure, low-carbon energy to UK homes and reinforce the alliance between France and Britain for decades to come.


Old alliances

On Monday I attended a breakfast in Paris between David Cameron and François Hollande. Witnessing this new testimony to the strength of the century-old Entente Cordiale, I could not help but think, bemused, of those commentators who claim that to ensure the success of the British renegotiation, there will have to be a highly visible Franco-
British spat at a forthcoming European council . . . Speaking of friendship in times of crisis, two days before the Paris attacks, I presented 19 British veterans with the Légion d’honneur, France’s highest honour, in recognition of their role in securing France’s liberation during the Second World War. Over 1,000 have received their medals so far and many more will get them in the months to come. I’ve received a number of poignant letters from them as a result. In the midst of the grief and despair, it will be all the more moving to honour these veterans. They are a reminder that courage, determination and, above all, solidarity will triumph.

Sylvie Bermann is the French ambassador to the UK 

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State