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’Breaking the Bank (in gilts)
This’ll be a controversial argument about the Bank of England’s buying of UK government debt, we know… but it comes from Philip Rush of Nomura:
Aggressive quantitative easing brings [gilt] market capacity constraints into play.
Looking at UK repo trends
We’ve already brought you one collateral crunchy statistic from the Bank of England’s latest monetary and finanical statistics. But here’s another interesting trend from the Bank’s gilt repo and stock lending numbers.
On redeeming the war loan
From the minutes of the UK’s Debt Management Office consultation with Gilt-edged Market makers and investors held on January 12:
There were also a number of calls for clarification around the prospects for the redemption of 3½% War Loan,
Keep calm and call the War Loan
(Alternative title: Financial repression meets the History Channel?)
Telling the UK government to issue 100-year bonds clearly wasn’t out-of-the-box enough for Societe Generale’s rates strategist Julian Wiseman.
Any port in a storm – UK gilt edition
After a splurge in September, overseas investors scooped up a more gilts in October, according to figures released by the Bank of England on Tuesday.
(Graphic via Divyang Shah at IFR).
Mix in some QE,
How I learned to stop worrying and love the UK and gilts
As a concept, the UK as a haven takes some getting your head around.
Fortunately, Andrew Roberts, head of European rates strategy at RBS, is on hand to help understand why the UK and in particular its gilt market,
(Mis)pricing the UK
Has the bond market got it right when it comes to the UK?
On Tuesday, Lex investigated why the UK can raise debt at substantially cheaper levels than its eurozone counterparts, in particular France.
Building a better bank recap, discount curve edition
At some point on Wednesday, eurozone governments will say they want banks to find an unspecified amount capital, based on revised sovereign haircuts which… we still don’t know a lot about.
We know that sovereign bond positions will be marked down,
QE2 collateral damage
No wonder the National Association of Pension Funds has been wailing about the Bank of England’s plan for another round of QE.
September’s update from the UK’s Pension Protection Fund makes for grim reading.
Four months of UK QE
But not for Christmas! From the Asset Purchase Facility’s market notice for the BoE’s £75bn of further quantitative easing:
Asset Purchase Facility: Gilt Purchases
1. The MPC has decided on a further £75bn of gilt purchases as part of its programme of asset purchases financed by central bank reserves.
Why is Britain still AAA?
Viewers of European CNBC early on Thursday morning will probably have seen Danske Bank making their case for cutting the UK’s credit rating by no fewer than four notches, from AAA to A+.
(Which is about where Italy is at the moment.)
It’s an eye-catching call,
From 1896 to 2011, in UK borrowing costs [updated]
The 10-year gilt yield fell under 2.4 per cent early on Thursday:
It was 2.37 per cent at pixel time.
So we’re not just well under the twentieth-century record low (1946, when yields fell to 2.5 per cent).
A gilt-y inflation record
Yields on 10-year gilts fell below 2.77 per cent on Tuesday — the lowest level for about 50 years.
However real yields are also at historic lows, with gilts yielding 2.2 per cent less than inflation.
Selling Italy, buying UK [updated]
Compare….
Contrast…
That’s a modern record low for the 10-year gilt yield and a record eurozone high for its Italian peer. Outwardly, it’s an amazing gulf in some respects as both sovereigns are doomed to low growth.
Britain isn’t just in very deep trouble. It’s doomed
This… will spark some debate. Anything on the future of the British economy entitled the ‘Armageddon Project’ and applying terms like ‘psychology of denial’ and ‘debt addiction’ will do that.
But since the UK’s growth outlook and status as a safe haven will be closely watched for the rest of 2011…
Great British contingent liabilities of the crisis
Government liabilities at 84.5 per cent of UK GDP, anyone?
Out on Wednesday — the government’s first ever attempt at WGA, (Whole of Government Accounting) applied to the 2009-2010 fiscal year in this case.
Reasons for a UK QE2 trade
To the minutes of the last Bank of England Monetary Policy Committee meeting…
… specifically paragraph 25 where the majority view is discussed:
25 - Most members judged that it was appropriate to maintain the current stance of monetary policy at this meeting.
Introducing… Kilt-edged securities
At long last, Scotland is to meet the capital markets.
Scotland is one of a rare breed of nations: it has its own legal system but lacks sovereignty. It’s also a fiscal outlier. Unlike sub-sovereign entities in the US,
NS&I certificates must be capped
This unlikely to go down well with nervous British savers but Citigroup thinks the government should cap the rates on the recently relaunched National Savings index-linked certificates.
It’s expensive,
The great UK debt reveal
It must be bash-the-UK week.
Following Tim Morgan’s warning and a forecast of a 10 per cent house price fall, Morgan Stanley’s Cath Sleeman and Melanie Baker have chimed in, with a note pouring doubt on the UK’s debt dynamics.
The importance of debt maturity
Boring title, we know. But stick with us ’cause there’s all sorts of thematic points in here — from sovereign debt crises to the weakness of short-term financing to interest rate shocks.
After the financial crisis,
“Surprises” in the UK national account data
There wasn’t a lot of sunshine to melt the avalanche of UK economic data released on Tuesday.
Revised UK Q4 GDP (-0.5 per cent rather than -0.6 per cent) and the UK Q4 current account deficit (-2.9 per cent compared to -2.4 per cent in Q3) came as little surprise.
UK rate rise jitters
What’s this? Some pre-MPC nerves in the government bond market:
RTRS-UK 10-YEAR GILT YIELD RISES TO 9-MONTH HIGH AT 3.865 PCT
IFS: beware the UK labour market
If policy wonks had their way, the publication date of the IFS Green Budget would be a national holiday.
We exaggerate — slightly — but for an arid testament to the prose potential of Excel spreadsheets,
A week is a long time… for the UK economy
The 10-year gilt yield hit an eight-month high on Tuesday…
As has the five year…
And the two year…
Meanwhile the pound has moved higher against the dollar.
The main catalyst for those moves had been a very strong UK PMI manufacturing report for January.
There are times when inflation is good for Britain
From the UK’s Debt Management Office on Thusday (FT Alphaville’s emphasis):
The extent of high quality demand mobilised today has enabled us to raise slightly more than we had originally planned through index-linked syndications from within the supplementary programme as a whole;
Why are gilts still going?
We ask, since ten-year gilt yields only just reached an eight-month high on Friday:
Remember when UK government bonds were on top of the world?
It was, err, four short months ago. Nomura’s Sean Maloney and Guy Mandy haven’t forgotten (emphasis ours):