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’UK QE2 coming down the slipway
The minutes of the Septmeber’s MPC meeting are out and …
-BOE – DECISION ON QE IN SEPTEMBER WAS FINELY BALANCED FOR MOST MPC MEMBERS
- BOE – FOR SOME MEMBERS, CONTINUATION OF TRENDS SEEN IN AUGUST WOULD BE ENOUGH TO JUSTIFY MORE QE
- BOE- MPC DISCUSSED OTHER OPTIONS TO EASE IF NEEDED,
The QE3 pain threshold
Here’s an interesting graphic from Nomura’s fixed income team for bubble addicts.
It shows the pain thresholds for QE3.
As you can see, inflation expectations are some way from being compatible with another round of bank note printing – although that hasn’t stopped a lot of market participants and parts of the media talking about QE as a potential market saviour.
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.
Inflation and the USD
Q: How much does the USD need to fall to meaningfully boost US inflation?
A: A lot.
That’s the conclusion of a benchmarking exercise Goldman Sachs has run on dollar weakness and inflation and explains why Jan Hatzuis and his team believe the Fed needs to buy $2,000bn of assets under QE2 if it serious about hitting its inflation and unemployment targets.
Debunking carry-trade denial
To carry trade or not to carry trade. That is the question.
In the last few weeks a host of different banks have stepped forward to question both the depth and degree of the current dollar carry trade. Among them have been Goldman Sachs,
The governor’s insatiable appetite for QE
From the minutes of the last Bank of England monetary policy committee meeting…
The Governor invited the Committee to vote on the proposition that:
Bank Rate should be maintained at 0.5%;
The Bank of England should finance a further £50 billion of asset purchases by the creation of central bank reserves,
QE, explained?
A gem from the FT letters page…
From Mr Eric Keetch.
Sir, In a sleepy European holiday resort town in a depressed economy and therefore no visitors, there is great excitement when a wealthy Russian guest appears in the local hotel reception,
Introducing the BoE Macro Plus Fund
Here’s an interesting view on the Bank of England’s recent foray into the world of outright asset purchases from Evolution Securities on Tuesday:
1. As of Thursday the 6th August, the bank owned £918m corporate bonds.
An end to Britain’s QE
Could be nigh, according to Citi. And it’s all down to — you guessed it — inflation expectations.
From Citi’s Michael Saunders:
The June YouGov survey shows inflation expectations among the general public rising back to match the 2.0% inflation target,
Inflation and the QE exit strategy, an update from the BoE
Wa-oah. The Bank of England has gone weirdly, defensively inflation target crazy.
From a speech by the Bank’s exec director and chief economist, Spencer Dale, released Tuesday afternoon:
. . . The final criticism that I want to address is that the MPC needs to articulate more clearly its exit strategy [from its asset purchase programme/quantitative easing].
Staggered by Sweden
Here are some key statistical points regarding Sweden’s record GDP contraction of 6.5 per cent on the year in the first quarter, as handily compiled by Reuters:
- The contraction was the worst since the statistics office began publishing seasonally adjusted quarterly data in 1993,
Operation QE begins
From Reuters.
BANK OF ENGLAND SAYS ALLOTS £1.999bn of £2bn GILT PURCHASES TO COMPETITIVE BIDS.
BANK OF ENGLAND SAYS TOTAL OFFERS RECEIVED £10.508bn.
BANK OF ENGLAND SAYS BUYS £339m of 5.0% 2014 GILT AT WEIGHTED AVERAGE PRICE OF 114.792.
QE in action
Presenting the 10-year gilt, where the yield dipped below 3% on Monday morning.
And that’s record – well, the first time it has happened since comparable records begain in 1958.
The recent price action…