RepublicanConventionandJacksonHoleConference

As the Republic National Convention where US President Donald Trump will formally be anointed as the Republican party candidate gets underway today, it is expected that the speeches by the various delegates will raise the pitch not only for the domestic US audience but also for the international ones, especially for the watchers of the Sino US relationship. President Trump, in a brief press conference yesterday, made the announcement that a “very historic breakthrough” has been found in the context of a Covid vaccine as the US administration granted authorization for the use of blood plasma from covid patients who have recovered.

During this week we will have the annual Jackson Hole symposium where the Fed Chief Jerome Powell will be giving a speech reviewing monetary policy. It is ironic to call the conference Jackson Hole because no participant will be physically present in that  town and it will be an online affair this time. The annual gathering of the stalwarts from the field of economics and finance has always generated a lot of media attention.

Raghuram Rajan writes in his book The Fault Lines about the 2005 Jackson Hole conference where he presented the now famous paper “Has financial development made the world riskier?”. The 2005 conference was the last one of the Greenspan era and the mood was to eulogize the legacy of the great central banker. The general feeling was that the proliferation of risk sharing products like CLO’s and CDO’s have resulted in identifying the optimum price of any risky asset.  Rajan writes that the content of his paper, in which he surmised that these products are making the finance world more risky and fragile, was considered a heresy at that time. The 2008 meltdown, though, proved him right. It will be interesting to read the papers which get presented this time as they will give us a peek into what can be expected from this era of low interest rates in the future.

Domestically, the big news is from the bond markets where the yields have finally  yielded to the right. The 5.79 2030 bond is currently trading at 6.19 in the opening today after taking a 12 bps jump on Friday. The primary reason touted is the lack of announcement on the OMOs or OTs. The Friday auction results also added to the gloom. The WSS released on Friday showed that the RBI total reserves as on August 14^th 2020 stood at USD 535.25 bn which is a downward movement of USD 2.93 bn for the week. The major contributor to the decrease interestingly was the fall in the value of gold reserves by close to USD 2.2 bn. The coronavirus cases in India have inched up to the 3 million number now.