Transparency Proposals for European Sovereign Bond Markets

The debate over the possible extension of transparency regulation in Europe to include sovereign bonds has opened up a number of other issues in need of serious consideration. One such issue is the appropriateness of the entire infrastructure supporting the trading of European sovereign bonds. In recent years sovereign issuers have supported the development of an electronic inter-dealer market but have remained unconcerned with the opacity of dealer-to-customer trading. The degree of segmentation in this market is high relative to what exists in nearly all other financial markets. This paper explores why European sovereign bond markets have developed in such a segmented way and considers how this structure could be altered to improve transparency without adversely affecting liquidity, efficiency or the benefits enjoyed by primary dealers and issuers. It is suggested that the structure of the market could be improved greatly if the largest and most active investors were permitted access to the inter-dealer electronic trading platforms. This would solve a number of market imperfections and increase the proportion of market activity that is conducted in a transparent way. The paper argues that sovereign issuers in Europe have the means to provide incentives that would influence dealers to support reduced segmentation. Some practical examples of how this could be achieved are provided and the potential benefits are outlined.

China's Sovereign Wealth Funds: Problem or Panacea?

China’s impressive economic growth has led to the accumulation of massive financial assets. The emergence of sovereign wealth funds (SWFs), as a governmental investment device for its excessive foreign reserves, symbolizes a major rebalancing of economic power. With its investment portfolios drastically diversified for well-established financial institutions as well as some strategic sectors, a seminal debate seems centered on whether China’s SWFs are in furtherance of purely commercial or geopolitically strategic purposes. Under the sophisticated hard laws associated with international initiatives, it is unlikely that the SWFs-related investment would distort the global financial system, and genuinely threaten national security, which assumption may only exist at a hypothetical level. The potential protectionism would inevitably retard the world economy’s recovery, were it not to be proportionately addressed. A most significant necessity appears to be to strike a proportionate balance between sustaining the credibility of open investment environment and efficiently minimizing implications of SWFs political arenas.

Unfunded pension liabilities and sponsoring firm credit risk: an international analysis of corporate bond spreads

This paper tests empirically whether pension information derived by corporate pension accounting disclosures is priced in corporate bond spreads. The model represents a hybrid of more traditional accounting ratio-based models of credit risk and structural models of bond spreads initiated by Merton (1974). The model is fitted to 5 years of data from 2002 to 2006 featuring companies from the US and Europe. The paper finds that while unfunded pension liabilities are priced in the overall sample, they are not priced as aggressively as traditional leverage. Furthermore, an extended model shows that the pension–credit risk relation is most evident in the US and Germany, where unfunded pension liabilities are priced more aggressively than traditional forms of leverage. No pension–credit risk relation is found in the other countries sampled, notably the UK, Netherlands and France.

Germany v Italy:The Triumph of Sovereign Immunity over Human Rights Law

This article analyses the doctrine of State immunity within the context of the recent judgment of the International Court of Justice (ICJ) concerning the Jurisdictional Immunities of the State (Germany v Italy: Greece intervening). The object of this article is to explore the implications of the State immunity from foreign judicial proceedings in cases of jus cogens crimes. Challenging the assumption that the law of immunity is merely procedural in nature, this article argues that there can be no immunity in cases of undisputed international crimes.

Eurozone Network Connectedness During Calm and Crisis: Evidence from the MTS Platform for Interdealer Trading of European Sovereign Debt

This paper examines the connectedness of the Eurozone sovereign debt market over the period 2005–2011. By employing measures built from the variance decompositions of approximating models we are able to define weighted, directed networks that enable a deeper understanding of the relationships between the Eurozone countries. We find that connectedness in the Eurozone was very high during the calm market conditions preceding the global financial crisis but decreased dramatically when the crisis took hold, and worsened as the Eurozone sovereign debt crisis emerged. The drop in connectedness was especially prevalent in the case of the peripheral countries with some of the most peripheral countries deteriorating into isolation. Our results have implications for both market participants and regulators.

The Tragedy of Darfur and the Limits of the Responsibility to Protect

The view that states which claim sovereign status must comply with the responsibility to protect their own citizens is gaining ground in international politics. When a state is unable or unwilling to meet this responsibility, the international community is justified in intervening militarily to end widespread human rights violations. This article argues that a diffuse responsibility to protect, as currently conceived, may have important negative consequences. By using the ongoing tragedy of Darfur as an example, the article argues that the responsibility to protect is reactive and focused on the short term, contributes to the outbreak of violence and perversely provides repressed groups with a further incentive to continue their armed struggle after war breaks out. The tragedy of Darfur shows that effective protection requires case-specific policies aimed at prevention, democratization and economic and political development.

'American hegemony after September 11: Allies, rivals and contradictions'

11 September heralded and provided a pretext for a more aggressive but increasingly contradictory American hegemony. Some of the consequences are contrary to the United States' own interests. Its new doctrine of 'preemptive strike' against other sovereign states encourages similarly belligerent behaviour by other governments, and yet more terrorism by nonstate actors, the very threats which were to be eradicated by a re-asserted US hegemony. This essay focuses on three partly overlapping themes: different strategies towards allies - multilateral and unilateral; different forms of power - civil and military; and different ideologies of globalisation - neoliberal and neo-conservative. It argues that while US policy may oscillate between such poles, it often combines the different elements. The overall strategy of the Bush administration is best characterised as unilateral multilateralism. The main issue for US hegemonists is the ways in which their hegemony might best be exercised, maintained and strengthened vis à vis allies and rivals. But for a safer, more democratic world, the choice does not lie between one faction of US hegemonists and another: we need other alternatives such as cosmopolitan democracy and a genuine internationalist movement which would give it some much-needed substance.

The Euro as an International Currency: explaining puzzling first evidence from the foreign exchange markets

This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the creation of the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates. The starkest example is the DM(euro)/yen rate in which the spread has risen by almost two-thirds while the volume decreased by more than one third. This outcome is surprising because the common currency concentrated market liquidity in fewer external euro rates and higher volume tends to be associated with lower spreads. We propose a microstructure explanation based on a change in the information environment of the FX market. The elimination of many cross currency pairs increased the market transparency for order flow imbalances in the dealership market. It is argued that higher market transparency adversely affects the inventory risk sharing efficiency of the dealership market and induces the observed euro spread increase and transaction volume shortfall.

Benchmark Status in Fixed-Income Asset Markets

What is a benchmark bond? We provide a formal theoretical treatment of this concept that relates endogenously determined benchmark status to the location of price discovery and we derive its implications. We describe a rich but little used econometric technique for identifying the benchmark that is congruent with our theoretical framework. We apply this in the context of the US corporate bond market and to the natural experiment that occurred when benchmark status was contested in the European sovereign bond markets after the introduction of the Euro. We show that France provides the benchmark at most maturities in the Euro-denominated sovereign bond market and that IBM provides the benchmark in the 10 year maturity in the US corporate bond market.

Stratification and Monitoring of Juvenile Idiopathic Arthritis Patients by Synovial Proteome Analysis

Juvenile idiopathic arthritis (JIA) comprises a poorly understood group of chronic, childhood onset, autoimmune diseases with variable clinical outcomes. We investigated whether profiling of the synovial fluid (SF) proteome by a fluorescent dye based, two-dimensional gel (DIGE) approach could distinguish patients in whom inflammation extends to affect a large number of joints, early in the disease process. SF samples from 22 JIA patients were analyzed: 10 with oligoarticular arthritis, 5 extended oligoarticular and 7 polyarticular disease. SF samples were labeled with Cy dyes and separated by two-dimensional electrophoresis. Multivariate analyses were used to isolate a panel of proteins which distinguish patient subgroups. Proteins were identified using MALDI-TOF mass spectrometry with expression further verified by Western immunoblotting and immunohistochemistry. Hierarchical clustering based on the expression levels of a set of 40 proteins segregated the extended oligoarticular from the oligoarticular patients (p <0.05). Expression patterns of the isolated protein panel have also been observed over time, as disease spreads to multiple joints. The data indicates that synovial fluid proteome profiles could be used to stratify patients based on risk of disease extension. These protein profiles may also assist in monitoring therapeutic responses over time and help predict joint damage. © 2009 American Chemical Society.

Nationalism, Ethnicity and Self-Determination: A Paradigm Shift?

An ongoing paradigm shift is giving birth to a more multidimensional understanding of the relationship between nationalism, sovereignty, self determination and democratic governance. A common element across the various versions of the new paradigm is the dispersal of democratic governance across multiple and overlapping jurisdictions. Governmental processes are no longer seen as discrete, centralised and homogenous as in the old nation-state model, but as asymmetrical, multilayered and multicultural, with devolution into multiple jurisdictions. These changes have hardly affected the two main conceptual frameworks that dominate the study of nationalism, Modernism and Ethnosymbolism. As a result, they risk becoming irrelevant to the new forms of national self determination, asymmetrical governance and shared sovereignty. Modernism and Ethnosymbolism insist that nationalism seeks to equate the nation with a sovereign state, while in reality the overwhelming majority of nations are stateless and unable to build nation states, as they often inhabit territories shared with other nations. The paradigm shift occurs precisely with the realisation that nation state sovereignty is no longer a feasible solution to the demands of stateless nations. Ethnosymbolism is in a much better position to adapt to the paradigm shift provided it abandons the claim that the nation state is the best shell for the nation.

Cosmopolitan Exception

There has been a resurgence of interest in cosmopolitanism in contemporary political theory, based upon the hopeful premise that it heralds an ameliorative response to the malignity of sovereignty's lack and the treacherous violence of sovereignty's excess. The promise of cosmopolitanism inheres in the claim that state sovereignty is and should be supplemented by an international system backed by the legitimacy of international law, grounded in the sovereignty of human rights. Drawing upon Foucault and Agamben, my argument in this essay is that the laudable endeavour of liberal cosmopolitans is flawed in two ways: first, cosmopolitanism cannot escape sovereign violence, because it cannot escape sovereignty; and second, cosmopolitans misconstrue the composition of the very sovereignty they aim to escape. This means that cosmopolitan theorists are unable to identify cosmopolitan practices of sovereignty that also entail forms of violence: cosmopolitan exception. Cosmopolitan exception denotes violent sovereign practices that cannot be differentiated from the protection of rights.

Reynolds Number Effects on Fully-Developed Pulsed Jets Impinging on Flat Surfaces

A systematic study of the effect of the Reynolds number on the fluid dynamics and turbulence statistics of pulsed jets impinging on a flat surface is presented. It has been suggested that the influence of the Reynolds number may be somewhat different for a jet subjected to pulsation when compared to an equivalent steady jet. A comparative study of both steady and pulsating jets is presented for a Reynolds number range from Re = 4;730 to Re = 10;000. All the other factors that affect the flowfield are kept constant, which are H/d = 3, St = 0.25, and d = 30.5 mm. It was found that for the range of the Reynolds numbers tested, pulsation results in a shortening of the jet core, the centerline axial velocity component declines more rapidly, and higher values of the radial velocity component for r/d > 0.75are observed. As the Reynolds number increases, the jet spreads more rapidly, the turbulent kinetic energy and nondimensional turbulent fluctuations decrease, and the flowfield near the impinging surface changes drastically, which is evident with the development of a turbulent momentum exchange interaction away from the wall for r/d > 1.5.