This is a guest post Toby Nangle, head of multi asset allocation and co-head of global asset allocation at Threadneedle Investments, a UK-based fund manager.
The UK Government could reduce its debt and save the taxpayer £300m by exercising its right to call the ‘War Loan’ and refinance it with new perpetuals with the same coupon but a thirty-year non-call period or new long-dated bonds.
The War Loan is one of the oldest bonds in the market issued by HM Treasury back in 1932. Read more
There is a paper to be written on how UK structured finance nomenclature borrows from the topography of a Britain which is sort of (but not quite) familiar, and which feels reassuringly permanent. We suppose it’s like the Shipping Forecast.
Aire Valley, Arkle, Arran, Brass (that one’s from Yorkshire), Darrowby, Granite (famously), Lanark, Leofric… Read more
A recent speech by Reserve Bank of Australia boss Glenn Stevens contained this striking chart:
Nothing has been decided yet, but it looks increasingly like BHP Billiton is going to spin off its unwanted smaller assets in a new company — effectively undoing
another dud mining industry deal what’s left of its 2001 merger with South Africa’s Billiton.
But lots of questions remain unanswered. Two stand out in particular: What does this mean for a share buyback and what will PLC shareholders get out of it? (Remember BHP is a dual-listed company with Ltd shares in Australia and PLC shares in the UK). Read more
(Disclosure: the author is 27… and renting.)
From the UK Prudential Regulation Authority’s consultation paper on the loan-to-income cap… Read more
From Tomas Hirst, editorial director of Pieria, commissioning editor at the World Economic Forum and sometime playwright…
Commentators have been huffing and puffing themselves breathless with warnings of an imminent market correction in Britain’s property market. Even the European Commission has got in on the act warning policymakers of the risk of “excessive house price rises and increases in mortgage indebtedness”.
What there is no disagreement over is that prices have been rising strongly. According to the Nationwide House Price Index the average UK house price sold for a record £186,512 in May pushing annual pace of price growth up to 11.1 per cent:
In his most forthright warning yet over the property market, Carney said policy makers “could do more” to tackle excesses if needed…
– Bloomberg, May 18 Read more
UK chancellor George Osborne announced on Monday that the Bank of England will initiate a scheme to help support export finance for UK exporters.
This, as the BoE explains on its website, will see the Bank accept UK Export Finance-guaranteed debt capital market notes as collateral for liquidity operations, encouraging (it is hoped) banks to make export-finance related loans to industry. So, similar to funding for lending, but on this occasion specifically lending to export businesses. Read more
Do click for other Terms of Reference of the FCA independent directors’ inquiry into the FCA’s role in the implosion of life-insurance shares last month…
When Morgan Stanley’s Huw Van Steenis and his colleague Charles Goodhart ventured into these pink pixels last September, arguing that Britain needed a housebuilding and house-buying support scheme if the economy was going to achieve ‘escape velocity,’ the analytical duo probably didn’t count on getting dragged through the august columns of the FT editorial page.
But that’s what happened… Read more
The ECB’s deflation problem has been well covered.
Years of mass media conditioning that the UK has an inflation problem, however, have assured that the BoE’s flirtation with disinflationary pressure has by and large been overlooked.
But there are clues that this might become a problem soon enough. Read more
This post is just to flesh out a point in this great piece by John McDermott — so read that first.
But we think it’s an important point. An alternative title for this post: What’s under your gilt?
After all, it is the debt that has enabled Her Majesty’s government to turn so breezily confident that currency union with an independent Scotland “is not going to happen”, fully seven months before an independence referendum. Read more
Inflation had returned to the 2% target… and cost pressures were subdued. Members therefore saw no immediate need to raise Bank Rate even if the 7% unemployment threshold were to be reached in the near future. Moreover, it was likely that the headwinds to growth associated with the aftermath of the financial crisis would persist for some time yet and that inflationary pressures would remain contained…
Someone tell cable? Read more
We know that living in a counterintuitive zero-rate world can lead to lay misunderstandings.
For example, there’s the paradox of thrift and the idea that saving can be bad. WHAAT? Then there’s asset nationalisation and government spending, and the idea these can be good for capitalism. WHAAT REALLY? Last and not least — after years of general indoctrination that inflation is always bad — there’s the fact that inflation can actually be a good thing.
This presumably explains why, when the ONS announced this week that UK CPI had slowed to 2 per cent, the story was almost universally covered in the UK press as a good thing and a sign of a wonderfully encouraging turnaround in the economy.
Indeed, UK chancellor, George Osborne, was immediately wheeled out across numerous networks to take credit for his fabulous economic work. Read more
UK home-builders trying to move ahead of the political wind on foreign investors buying up London property?
In any case, though we missed this on Wednesday it seems part of the Zeitgeist — eleven of them agreed not to sell UK (read: London) new-builds abroad before they go on the domestic market from next year: Read more
Does £450/sq ft really count as ‘prime’ London these days?
We don’t know. But these were some interesting charts from Deutsche Bank nevertheless on Monday, about who’s been buying up London from abroad: Read more
So, we may have been a little distracted by the boom in estate agents, dark inventory, and London houses earning more than their occupants to see what was really going on.
In fact, London is in the grip of a terrible and deep housing bust that has only just begun to turn. Greater London house prices, adjusted for inflation, are fully 27 per cent below their peak in the summer of 2007.
So, everyone has their knickers in a twist about the UK’s ‘Help to Buy’ scheme. Is it overall good? Is it bad? Does it make sense? Are there risks? Will it help anyone in the south? Anyone in London?
All this in the context of cries of “it’s only perpetuating the global property ponzi game!!” Read more
We know that one day UK high streets will be windswept vistas of pubs, charity shops and discount grocery stores, with the odd place to pick up your online purchases from Asos.
On the way to that utopian dream, however, a great deal of disruption lies. And Citi have spotted that for the likes of Tesco and Morrisons, it looms sooner rather than later. Read more
It’s Help to Buy 2 launch day. Or, extend mortgages and warehouse them until the UK government supplies its guarantee for a portion of the money in January, launch day.
The scheme’s complete rules are here if you missed all 66 pages. Note the lending policy questionnaire.
So, reflecting on some HTB bits and pieces floating around on Tuesday… Read more
It’s “a reasonably sensible policy with some likelihood of success.”
What recent government initiative might Neville Hill and Steven Bryce, Credit Suisse UK economists, be referring to?
Why Help to Buy 2 of course. Read more
In contrast I am an optimist. I believe in free markets.
–George Osborne, Conservative party conference 2013
Details TBC, of course. But UK banks will be lending mortgages with a five per cent deposit in the very near future, under the rushed-forward Help to Buy 2 scheme.
And that means the UK government will be guaranteeing them — not the borrower — the next 15 per cent of mortgage value. Hence the fee paid by lenders for the guarantee (90bps for a 95 per cent loan to value, less for lower LTVs, apparently). Read more
Some hurried back-covering from Britain’s Financial Policy Committee, which last met on September 18…
In the United Kingdom, the continued recovery of the banking sector had been associated with a further easing in credit conditions. Against that backdrop, the recovery in the housing market appeared to have gained momentum and to be broadening.
Ever feel like you are slipping behind in the rat race? Well, Londoners now face competition from their homes as well. The average house in the capital is now earning as much as its occupants.
As we noted noted last week, London house prices are rising far faster than in the rest of the UK, up 9.7 per cent over the 12 months to July on ONS figures. Read more
As a coda to the regional problems with trying to create national, ‘prudential’ policies for UK house prices… here’s this chart, via the ONS on Tuesday: Read more
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The triennial central bank survey of foreign exchange and derivatives market activity from the BIS is out.
FX details are here and OTC IR derivatives are here. Oh, and the Bank of England’s parochial summary is here.
But if you are interested in how financial centres stack up against each other you’ll need to consult this table: (Click to enlarge)
We missed this speech by Lord Hope, the former Deputy President of the UK Supreme Court, last week. Shame.
It covers the plight of Rangers Football Club, the Insolvency Act 1986; why legal textbook writers don’t have to be dead before you can cite them any more; and the implications of the court’s May decision in the Eurosail case — one of the most important judgments for securitisation law in years. Read more
Not a relaxation of capital requirements by the Prudential Regulation Authority on Wednesday — it’s a relaxation of the amount of liquid assets which banks have to hold (falling by some £90bn, apparently) so long as they do meet strictures on capital.
From the release: Read more