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’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):
Dousing ‘UK optimism’
Whatever happened to UK doom and gloom eh?
Monument Securities’ Marc Ostwald is here to serve on Friday morning — with a hefty dose of good ol’ fashioned British grumpiness — and bond vigilantism.
We’ll sit this one out, Ben
HMS QE2 will not set sail from the Bank of England … this time.
Instead, the same old song from Threadneedle Street:
Was it the UK’s above-target inflation wot sunk it? We’re getting the BoE’s latest Inflation Report on November 10,
The unsinkable, unfalsifiable HMS QE2
Did you hear the one about the superliner that squeezed under a Danish bridge with just an inch and half to spare?
It’s getting that way with HMS QE2.
Exhibit A — More decent UK data in the shape of a manufacturing PMI,
Whatever happened to the bond bulls?
Readers might remember how the RBS rates team became rather bullish on bonds over the summer.
You know — ‘oozing with bond bullishness’, 10-year bunds yielding at 1 per cent by the end of 2010, that sort of thing.
Gilts, bashed
In a way, you sort of have to give gilts credit for hanging on to the anchor even as HMS QE2 sails out of reach, out of the harbour, into the distance, based on stronger UK GDP data.
Sure, 10-year gilts are already selling off — from historic lows — chart via Bloomberg (click to enlarge):
Market wets itself over UK QE
Here’s one for the ‘weird QE effects on equities’ files. One for those already identifying higher inflation expectations even before QE is announced, too.
Presenting the incredibly inflating share prices of UK water companies, as noted by Evolution Securities on Monday (chart via the FT/Reuters):
Can gilts go on?
UK gilts are performing better than they have been for decades.
But… gilts might also be just about on the brink of a pullback in their hour of triumph.
And not for the reasons you’d perhaps expect.
Something for the weekend
Here are a couple of contrarian views to mull this weekend.
The first comes from Greg Gibbs at RBS, who says the case for shorting the dollar no longer looks clear-cut:
The market has developed an expectation that the Fed will deliver a big QE on 3 November.
Auf QE-dersehen, pet
First time since May 2009, this. The five-year gilt yield has fallen under the yield on five-year Bobls (chart via Bloomberg, click to enlarge):
Meanwhile, 10-year gilts are trading the tightest to their bund peers since late 2009 (chart via Bloomberg,
HM Abattoir (updated)
And so the axe falls. Click the image below for a full PDF copy of the UK coalition government’s spending review, setting out four years of fiscal cuts to the British state:
The FT’s got a handy summary of some key measures.
More gilt-free bloodshed
Here’s a bit more on why the UK government’s massive spending review has had, and will likely have, less than a massive influence on the market for its bonds.
In fact — the government is detailing its cuts amid gilt yields that have rarely been lower in post-war history.
Gilt-free bloodshed
In public policy terms, this will probably be the most important day of this parliament, possibly of this decade…
– The Guardian.
George Osborne is polishing his scythe… The Chancellor must now try to kill the rapacious £155bn deficit by a thousand cuts…
Gilt tooth fairies
The UK’s prime minister David Cameron has — unfathomably — told his party’s conference the story of little Niamh (aged 6) who sent his coalition government £1 in tooth-fairy money to help fight the UK’s raging deficit.
So QE-asy it hurts
Gold glittering past a nominal record high:
The dollar sinking to a five-month low against the yen:
And even the euro is getting used to life at $1.35.
Clearly, Tuesday’s insider-y WSJ article on the Fed and QE2 has made waves.
Keep your fiscal friends close…
On the eve of a vast UK government review of spending cuts this autumn, Robert Chote has been tipped for the prestigious post of abattoir inspector chairman of the Office for Budget Responsibility.
And well,
Pondering last week’s bond sell-off
Could it be that the epic run in government bond prices has finally come to an end?
For example this was the action in the yields of US, German and UK government ten-year debt last week:
But as Marc Ostwald of Monument Securities notes in an early Monday email,
Survivor’s gilt, again
This one’s dedicated to George.
We aren’t absolutely sure, but it looks like the 10-year gilt on Tuesday plunged to a 50-year low — well below March 2009 levels, anyway:
We blame Dr Martin Weale.
The BoE behind closed doors – surprisingly philosophical
Or, what keeps Britain’s central bankers up at night.
The Bank of England and the Centre for Economic Policy Research hosted their fourth monetary policy roundtable on July 14, the summary report of which has only just been published.
Survivor’s gilt
Following the Philly Fed fail – the yield on ten-year UK gilts punched under 3 per cent on Thursday. First time since the panic days of March 2009:
Ultra-long yields meet the Big Pffft
This is a bond rally, punk. Go long — go ultra-long — or go home:
Although we’re not quite sure why.
For a start, the euro 30-yr swap caved even further into post-Lehman lows on Monday:
And speaking of ultra-long rates — we’d also note the curious difference in the inflation expectations apparently revealed in this chart of Tips (white line) and index-linked gilt (red line):
Gilt-ridden
Not nitroglycerine but, umm, something altogether more stable, ya know.
Gilts have overcome criticism at the start of 2010 to become one of the best-performing assets this year. Even Pimco, the bond fund whose manager Bill Gross made that famous “gilt market is resting on a bed of nitroglycerine”
Losses, shmosses from the BoE’s QE
Did you notice the Bank of England’s annual report on its Asset Purchase Facility?
The Telegraph certainly did:
Shame they didn’t catch this bit from the report:
The Telegraph attributes its £5.5bn loss figure to a fall in the value of the APF’s gilt-purchases,
Canvassing QE’s contribution
The Bank of England’s £200bn QEasing programme may have ended earlier this year, but one key question remains; how successful was it? And, perhaps more importantly, did investors value it?
This little survey — from Credit Suisse — can help with the latter query:
New (inflation swap) derivatives in town
RIP RPI?
As part of its emergency Budget, the UK government wants to switch public sector pension pay-outs from being based on the Retail Prices Index (RPI), to the Consumer Prices Index (CPI). CPI has generally been lower than its RPI-cousin,