Sector

Luxembourg’s financial supervisor CSSF on Thursday acknowledged that there is ‘some’ room for improving its international cooperation with other supervisors after a peer review conducted by the EU’s securities markets authority found a number of shortcomings in the supervision of financial institutions that provide cross-border services to retail clients under the European passporting system.

In what observers labelled as “dovish tightening”, the Federal Reserve on Wednesday evening raised interest rates for the first time since 2018 and flagged that six more rate hikes are coming later this year. Equity markets rallied but with an inverting yield curve, Treasuries reflect hesitation.

Luxembourg’s financial system has weathered the pandemic well, but the Russia-Ukraine conflict poses new risks to Luxembourg’s economy while the surge in housing prices from recent years threatens the attractiveness of the Grand Duchy, the International Monetary Fund (IMF) has concluded after a two-week mission.

The future of some 855 funds with exposure to Russia is shrouded in uncertainty as the turmoil in Russia’s financial markets continued on Monday. JP Morgan AM and Prosperity on Monday suspended their funds with assets in Russia. East Capital warned of “a very high level of disruption”. Asset managers are facing requests for information from their regulators.

For a country that is well established as a global leader in investment funds, one might expect its people to embrace more risk when it comes to their financial investments. As it turns out, the love for cash deposits is as big as ever.

Understanding risks related to the climate and environment, also known as CRE risks, and managing them will be a key challenge for banks over coming decades. Luxembourg’s banking association ABBL has sought to provide a framework for this in a new publication which also features some guidance related to strategy and governance, integration of CRE concerns within risk management frameworks and disclosure.

US 10-year yields rose above 2.0 percent last week. The last time 10-year yields were above 2.0 percent was in July 2019. With skyrocketing inflation and the Fed’s upcoming rate hikes in mind, that probably does not sound so crazy. Yet our model estimate for US 10-year yields points in the opposite direction.

We estimate US 10-year yields using the following factors:

- US unemployment rate

As digital assets are in focus for investors, there is a less visible, less shiny side to at least the Bitcoin story. While the total potential number of Bitcoins is fixed at 21 million, they haven’t all been created yet. New Bitcoins can be ‘mined’ through power-intensive computer analysis, which has a significant carbon footprint, according to Marion Laboure, senior economist at Deutsche Bank in London. There’s also a contrasting view, as set out by US-based portfolio manager Mark L. Casey at Capital Group.