Investment Officer Luxembourg

The collapse in the value of two cryptocurrencies linked to South Korea’s Terra blockchain has sent the crypto world aflutter. The resultant crash wiped out over USD 15 billion in cryptocurrency value, raising questions about the level of stability offered by “stablecoins” and attracting the attention of politicians and regulators worldwide. Jake Lee, chief strategy officer of Gopax, a South Korean cryptocurrency exchange, who knows the players involved,  shared his insights at the recent Finverse Forum conference in Luxembourg. 

Spreads on both corporate and high yield bonds have increased significantly in recent weeks. Nevertheless, especially the spreads on high yield bonds remain too low. Let’s get under the bonnet to explain why this is the case.

As the chart below indicates, corporate and high yield spreads are highly correlated. However, in recent weeks the spread combinations of both asset classes have been in the orange oval, indicating that high yield bonds are on the low side, compared to what you might expect based on history. The last data point is the pink square.

Accompanying Luxembourg’s finance minister Yuriko Backes on her official visit to Stockholm, Luxembourg’s financial community this week sought to strengthen its financial ties with Sweden, considered a “natural partner” for the Grand Duchy. Backes also discussed plans to support the reconstruction of Ukraine with her Swedish counterpart.

Travelling back to Luxembourg, Backes said on Twitter that her visit had been “very productive.” Backes was accompanied by a Luxembourg for Finance delegation and several representatives of Luxembourg’s financial services sector.

The neutral mixed fund portfolio consisting of 50 percent equities and 50 percent bonds remains popular despite year-to-date losses.

Luxembourg, Italy, Portugal and the Netherlands have all put forward candidates to succeed Klaus Regling as the head of the European Stability Mechanism, the 500-billion-euro eurozone bailout fund known as ESM. On Monday, the Eurozone finance ministers are due to decide on a successor for Regling, who steps down after a ten-year tenure and leaves behind a legacy at the Luxembourg-based ESM.

Financial markets do relatively well when it comes to predicting the future. Collective wisdom is ultimately translated into share prices. Index investors benefit from this collective wisdom and are effectively free riders to the hard work of many. Yet in the stock market, it is not easy to distinguish between what is possible and what is real.

The European Securities and Markets Authority recognises the asset management industry is under pressure to meet green investing rules and is preparing more detailed guidance shortly because it believes it is ultimately worthwhile work. “In a few weeks time you will be getting more guidance from the ESAs on various topics related to the SFDR,” an official said in Luxembourg.

Europe’s asset management industry on Wednesday threw its backing behind a legislative proposal to give asset managers a bigger say in the application of liquidity management tools, or LMTs, at times of market stress. The managers, not the supervisors, should be responsible for deciding on the use of such tools,  the proposal says.