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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.
UK debt: £1,003,900,000,000
Blame whoever or whatever you want, but net British debt, “excluding the temporary effects of financial interventions,” topped a trillion pounds sterling in December.
That’s equivalent to 64.2 per cent of GDP.
This (relatively) Inegalitarian Isle
This graph is from this powerpoint — part of a presentation by Alan Krueger, chairman of Obama’s Council of Economic Advisers.
So it has been used to illustrate American inequality and its effect on inter-generational social mobility.
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,
Tesco’s Big Price Drop
The share edition that is…
And all because the UK grocer announced the following in its RNS trading statement on Thursday:
“In a challenging economic environment, we made good progress internationally but despite record sales,
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.
The UK’s inflation myth
Told ya.
From Reuters…
RTRS-UK NOV CPI 0.2 PCT MM, 4.8 PCT YY (FORECAST 4.8 PCT YY)
RTRS-UK NOV RPI 0.2 PCT MM, 5.2 PCT YY (FORECAST 5.1 PCT YY)
RTRS-UK NOV RPIX 0.2 PCT MM, 5.3 PCT YY (FORECAST 5.2 PCT YY)
RTRS-UK NOV CPI ALL GOODS 5.1 PCT YY,
A sub-optimal solution to the Euromess [updated]
Policy changes the ECB announced last week will help banks directly and governments indirectly. But the EU fell short on every element of a comprehensive deal. On Friday, investors reacted positively to what was sold to them as a “fiscal compact”.
Everything’s not lost in a lost decade
The dreaded lost decade that is staring the developed world in the face might not be so bad after all. At least according to Citigroup’s glass-half-full equity strategy team.
Lost decades, defined as 10-year periods of painfully slow growth (circa 1 per cent per annum), are always painful for the wider economy but they need not be for equity investors.
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,
Dr Gloom’s Reform Trilogy
Brace yourself we have another helping of doom and gloom from Dr Tim Morgan, the author of the recent Project Armageddon report.
It’s the first part of his Reform Trilogy, titled Challenging the denial consensus:
FTSE asks the free float question
What is the minimum amount of a company’s shares that should be freely floated if that company is incorporated in the UK and wants to join the FTSE’s UK indices?
A simple question, but a contentious one.
UK GDP – As good as it gets?
From the Office for National Statistics on Tuesday:
GDP growth of 0.5 per cent in third quarter. A reasonable pace?
Not really. In fact, there’s good reason for thinking this is as good as it gets for some time to come.
(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.
UK inflation above 5 per cent…
… in September.
From the ONS:
Consumer Price Indices
• CPI annual inflation stands at 5.2 per cent in September 2011
• RPI annual inflation stands at 5.6 per cent in September 2011
The headlines for the September 2011 consumer price indices are:
Moody’s downgrades 12 UK financial institutions
And you thought it was going to be a quiet Friday?
No such luck. Moody’s has today downgraded 12 UK financial institutions. Here are the details (our emphasis):
London, 07 October 2011 — Moody’s Investors Service has today downgraded the senior debt and deposit ratings of 12 UK financial institutions and confirmed the ratings of 1 institution.
Bank of England restarts QE
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to increase the size of its asset purchase programme,
Compare and contrast – Italy and the UK
First the caveat. The following is written by the chief economist of a big Italian bank. So you can be forgiven for thinking “he would say that, wouldn’t he.”
But Unicredit’s Erik F Nielsen is surely onto something when asks why Italian funding costs are sitting above 5 per cent while investors demand just above 1.6 per cent to lend to the UK government.
Her Majesty’s SME CLOs?
It’s like putting your foot on the accelerator but because the transmission mechanism isn’t working properly, the car wheels don’t respond.
Actually George, that might be because the car is on fire,
S&P affirms the UK’s AAA
Does this look like grounds for a negative or a stable outlook on that affirmation, do you think? (Via S&P’s statement — released just as Chancellor George Osborne took to the stage at the Conservative party conference):
Independent Commission on Banking — the report
Click image for the full report:
Ring fences ahoy:
Analysis to follow.
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,
A return to asset purchases (in the UK)
We are a bit late to this, but here are selected highlights from Goldman Sachs prediction on Friday of further asset purchases by the Bank of England.
But this time Goldman economist Kevin Daly reckons there’s a good case for the BoE focusing on credit easing rather than the purchase of more gilts.
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).
Bank of England: “substantial downward risks”
Or to put it another way, the Bank’s fan charts are fanning out so much it’s ridiculous.
Here are two, via the Bank of England’s latest Inflation Report:
First on GDP (getting a bit negative there…):
Anarchy in the UK
Relax everyone, the UK’s haven status and AAA rating is safe.
Or so says Nomura in a ‘Riot’ special.
Selected highlights, emphasis ours:
The initial spark was a protest over the fatal shooting of a man by the police.
Großdeutschland, CDS edition
GERMAN 5-YEAR CREDIT DEFAULT SWAPS RISE ABOVE UK CDS FOR FIRST TIME-MARKIT
An up-scaled EFSF being priced in? Or something else. Discuss.