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Joshua McCallum

Joshua McCallum is Head of Fixed Income Economics at UBS Asset Management, where he provides economic analysis to support and challenge portfolio managers. Before joining UBS in 2005, Joshua worked for the UK Treasury, dealing with an eclectic range of topics including international macroeconomics, the UK budget, economic reform in Europe, and post-conflict fiscal policy in Iraq.

Joshua McCallum recently

February 2016

  1. Blog post | Tags: Joshua McCallum

    Anybody hoping that the latest batch of economic data will provide a clear insight into the state of the US economy could find themselves sorely disappointed. Take the US labor market report: not only do the findings from the non-farm payrolls and household survey conflict, so too does the wage data. The Fed may have declared that any future moves in interest rates will be data dependent, but with the data supporting both the hawks and the doves, debate among members of the FOMC could well be lively.

  2. Blog post | Tags: Joshua McCallum

    In an apparent volte face, the Bank of Japan introduced negative interest rates, much to the surprise of the markets. By targeting only marginal transactions, the BOJ is more similar to the approach taken in Switzerland, Sweden and Denmark than by the ECB. The market reaction was much stronger than the reaction to the ECB's introduction of negative rates. It was also more widespread, suggesting that markets might be now expecting a dovish reaction by the ECB and the Federal reserve.

January 2016

  1. Blog post | Tags: Joshua McCallum

    Should lower oil prices be considered bad news for equity markets and the economy? If the drop in the oil price is a symptom of weak global economic activity, then it is indeed bad news. But if it reflects an increase in supply, then it should be good news for everyone except oil producers. However, a severe and persistent oil price drop could be bad for equity markets if it forces sovereign wealth funds, mostly owned by oil producer countries, to liquidate assets to cover deteriorating public finances in those countries.

Recent charts

Chart 1: Waiting for weighting

Weighted average interest paid on reserves at the Bank of Japan (simulated, basis points)

Waiting for weighting

The market reaction illustrates that interest rates are, indeed, determined by the marginal transaction. So even though the weighted average interest rate is likely to remain positive for a long time, the yield curve dropped into negative territory all the way out to the 9-year bond (chart 2). The benchmark 10-year bond reached an all-time low of just 5.5 basis points. This is a very different reaction to what the ECB experienced when it introduced negative rates on all deposits (not just marginal deposits). The German bund yield curve actually steepened with yields at the front end falling less than Japan just saw, and the longer end actually rising.