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Bond book competition winners: the UK Exchequer 12% 2017-13 is the highest coupon gilt still outstanding

Posted on 22 March 2013 by Jim Leaviss

Still outstanding, but probably not for long. Although this gilt has a maturity date on 12th December 2017, there is a call option for the government at par (100) on 12th December this year (hence the 2017-13 date), and given the current price of the bond is well above par (108-ish) it will get redeemed, unless they forget. This is what’s known as a “rump” stock. Although it was once a £1 billion issue, most has been bought back over the years by the Bank of England or Debt Management Office, so there’s only £14.5 million left in the wild.

This gilt issue was announced in June 1978, when Rivers of Babylon by Boney M was number one in the UK music charts, and, most importantly Nottingham Forest FC had just won the football league. Forest would go on to win the European Cup two years in a row. And it was a proper competition in those days, not a stupid league like today. Shilton, Anderson, Burns, Lloyd, Clark, McGovern, Needham, O’Neill, Bowyer, Robertson, Birtles. And Clough and Taylor. You can read a bit more about this great team here.

Inflation in 1978 was 8.4%, so 12% was a nice real yield, although inflation had averaged 15.8% over the past 5 years, so it wasn’t a no-brainer. In fact your real return from gilts in 1978 was -20%, and -22.6% in 1979. Ouch. It wasn’t until 1982 that there was a positive real return, a lovely 29.2%. The interesting feature about gilts at the time was that they were issued partly paid, with 15% of the purchase price payable on the 15th June, 30% on 27th June and the rest on 14th July. We’re not really sure what the point of this was? To allow gilt investors to gear? To manage money market flows? Any veterans care to let us know?

Anyway the 20 tweeters who came up with the correct answer were:

@RobinNGhosh
@RichardPhilbin
@peds52
@Invest_Advisory
@Yogi_Chan
@byronburghart
@JeremyBeckwith1
@SeanGConnery
@m1kee123
@Partegas
@adamgrimsley
@DanBland
@Dario_Gainnini
@krista_andria
@hellocanuhearme
@amirriz 1
@EdBagenal
@HarpRob
@ssaxim
@NickRilley

Please DM us with your address so we can send you a copy of Mark Glowrey’s The Sterling Bonds and Fixed Income Handbook. Thanks for all of your entries.

Competition: win one of 20 copies of The Sterling Bonds and Fixed Income Handbook

Posted on 15 March 2013 by Jim Leaviss

Mark Glowrey has written an excellent guide to the UK’s bond markets, covering everything from gilts, linkers, corporate bonds and high yield, to dealing, settlement, tax and covenants. There’s also some great bond market history and anecdote – I like the story of the two brothers who worked as bond brokers at the London Stock Exchange. Both had been awarded the Military Cross in World War 2, but the second brother had been awarded the Military Cross and bar. The nickname of the first brother was “The Coward”.

We have 20 copies of the book to give away. You can win one by tweeting us (we’re @bondvigilantes) the answer to this question. Add the hashtag #BVbook to help us find your entry in our inbox please.

What’s the highest coupon currently available on a UK gilt?

See here for terms and conditions. Tweet us your entries by midday on Friday 22nd March. The 20 winners will be contacted shortly afterwards.

M&G Bond Vigilantes Christmas Quiz 2012: the winners and the answers!

Posted on 21 December 2012 by Jim Leaviss

It was a tough quiz this year – sorry. Here are the answers for you. The winner was Mike Haslam of Barclays Wealth who scored 20 out of 20. Congratulations – please let us know which charity you’d like to nominate for the £200 donation from us. The nine runners up, who like the winner receive a copy of Philip Coogan’s excellent book Paper Promises are:

Sam Morton, Mizuho International
Matthew Riley, Falcon Money Managment
Paul Amery, Index Universe
Mark Dufton, Charles Stanley & Co Ltd
Nick Tudball, BNP Paribas
Will Lewis, Hansa Capital
Adam Grimsley, Blackrock
Johnny Smith, Nomura
Andrew Woolston, Blackrock

What was created especially for Winston Churchill in 1950 as a brandy-like celebration drink?
Carlsberg Special Brew was created for Churchill’s visit to Copenhagen in 1950, and was originally called V-beer.
“We’re just going to draw the raffle numbers now”. Who and when?
Bradley Wiggins opened his Tour de France victory speech this year with these words, a nod back to the low budget, cash strapped days of UK bike racing where races were organised out of scout huts and village halls.
What’s this called?
This is Ampelmann, the East German pedestrian traffic light symbol.
“Beam me up Scotty”. Why was it third time lucky this year?
James Doohan, who played Scotty in Star Trek, had his ashes blasted into space on a rocket. It was third time lucky because the first two rockets his ashes were on both blew up after takeoff.
How is James Gatz from North Dakota better known?
He is the Great Gatsby from F. Scott Fitzgerald’s novel.
Held in 1994, it is said to be the biggest rock or pop concert ever. Who and where?
Although crowd numbers are difficult to judge when it gets this big, Rod Stewart’s MTV concert on Copacabana Beach probably had around 3.5 million attendees!
Archaeologists recently discovered a mummy in the Valley of the Kings, covered in chocolate and nuts. Who is it believed to be?
Pharaoh Roche.
The winner of this 7.4km race gets a red coat with a silver badge. Which race?
Doggett’s Coat and Badge, the world’s oldest rowing race (run since 1715), held on the River Thames.
What do all the cover stars of this magazine have in common?
This is iD, the style magazine. All of the front cover stars have an eye closed (usually winking).
Which fairground ride’s name derives from a military training game seen by crusaders in Turkey in the 12th century?
Carousel.
The Nike swoosh, a cheap US hipster beer, and a prize for fast ships. What?
The Blue Ribbon/Riband. Nike was originally called Blue Ribbon Sports, Pabst Blue Ribbon is a cheap, ironic hipster lager, and the Blue Riband was a prize for the fastest ship across the Atlantic.
What were bulky, ungainly monstrosities more suitable for the wide open vistas of a Scandinavian airport?
This is how London Mayor Boris Johnson described the bendy bus, replacing them with the new double deckers.
It shows a hundred consecutive pulses from the pulsar CP 1919, but is best known as what?
The image of those pulses was used as the cover of Joy Division’s Unknown Pleasures album.
Coppi was the first, Pantani the last. To do what?
To win both the Giro d’Italia and the Tour de France in the same year. Bradley next in 2013?
Who famously finished the story of Bleak House, and was then sitting down to start Great Expectations that afternoon?
Neville Chamberlain told the House of Commons in 1934 “we have finished the story of Bleak House, and are sitting down this afternoon to the story of Great Expectations”.
Who’s stationary did this logo head up?
This was Captain Robert Scott’s stationary from the doomed Terra Nova expedition to the South Pole in 1911-12.
Following electromagnetic surveys, and eyewitness accounts from elderly locals, it’s hoped that a dig will uncover 36 of them in Burma. What?
It’s hoped that the dig will turn up crates containing RAF Spitfires, buried in the jungle to keep them out of Japanese hands in WWII. They’d be worth many millions of pounds each and could be in virtually mint condition.
Earlier this year, a hedge fund managed to seize an asset as part of its claim against Argentina following the latter’s sovereign bond default. What was it?
Elliott Associates, a hedge fund and owner of Argentinian debt, seized an Argentinian naval ship, the Libertad, docked in Ghana earlier this year. However, it looks as if the government is about to release the ship.
Who is this?
It is Snufkin, from the Moomins.
As he looked through a hole in a wall in 1922, someone asked him if he could see anything. He said “Yes, wonderful things”. Who?
Howard Carter. The archaeologist was the first to peer into Tutankhamun’s tomb through a crack in a doorway. Lord Carnarvon asked him if he could see anything, and this was Carter’s reply.

Congratulations to all the winners. We’ll be in touch shortly. Happy Christmas everyone and thanks for reading the blog in 2012.

M&G Bond Vigilantes Christmas Quiz 2012

Posted on 3 December 2012 by Jim Leaviss

For the sixth year in a row, we bring you the Bond Vigilantes Christmas Quiz. As always there are 20 questions, and the closing date for entries is midnight on Thursday 20th December 2012. Please email your answers to us at bondvigilantes@mandg.co.uk.

The prize is, once more, glory. But the winner will also get to choose a charity to which we will donate £200. He or she will also win a hardback copy of Philip Coggan’s excellent Paper Promises: Money, Debt and the New World Order. The nine runners up will get a paperback copy of the same. Conditions of entry are shown at the bottom of this post entry. Good luck!

What was created especially for Winston Churchill in 1950 as a brandy-like celebration drink?
“We’re just going to draw the raffle numbers now”. Who said this and when?
What’s this called?
“Beam me up Scotty”. Why was it third time lucky this year?
How is James Gatz from North Dakota better known?
Held in 1994, it is said to be the biggest rock or pop concert ever. Who performed and where?
Archaeologists recently discovered a mummy in the Valley of the Kings, covered in chocolate and nuts. Who is it believed to be?
The winner of this 7.4km race gets a red coat with a silver badge. Which race?
What do all the cover stars of this magazine have in common?
Which fairground ride’s name derives from a military training game seen by crusaders in Turkey in the 12th century?
The Nike swoosh, a cheap US hipster beer, and a prize for fast ships. What?
What were bulky, ungainly monstrosities more suitable for the wide open vistas of a Scandinavian airport?
It shows a hundred consecutive pulses from the pulsar CP 1919, but is best known as what?
Coppi was the first, Pantani the last. To do what?
Who famously finished the story of Bleak House, and was then sitting down to start Great Expectations that afternoon?
Whose stationery did this logo head up?
Following electromagnetic surveys, and eyewitness accounts from elderly locals, it’s hoped that a dig will uncover 36 of them in Burma. What?
Earlier this year, a hedge fund managed to seize an asset as part of its claim against Argentina following the latter’s sovereign bond default. What was it?
Who is this?
As he looked through a hole in a wall in 1922, someone asked him if he could see anything. He said “Yes, wonderful things”. Who was he?

To enter the competition, please click here and to view the T&Cs, please click here.

The information we collect from you is used solely to notify you should you win the competition

Metroboom – Lessons from Britain’s Recovery in the 1930s by George Trefgarne. And win a copy!

Posted on 29 November 2012 by Jim Leaviss

In my last blog, about the many positive signals for US housing and the massive potential for that to drive US growth over the next couple of years (see here). I mentioned that I’d met recently with George Trefgarne, the author of a Centre for Policy Studies booklet called Metroboom. In it he pointed out how important housing construction had been in the UK’s recovery from the “slump” of the 1930s – I suggested that house building would be a very powerful way for the UK to get out of our current growth problem. As we’ve pointed out before, the UK’s growth performance from the credit crisis onwards is actually far worse than it had been in the 1930s in terms of lost GDP.

Metroboom is definitely worth a read. It certainly adds to the debate on the austerity vs fiscal stimulus debate, and (perhaps controversially) argues that it was a combination of spending cuts and tax cuts that helped to restore economic growth in the UK in the 1930s. The paper also argues that the view of the 1930s as universally gloomy in the UK is overstated. Areas that relied on shipbuilding and coal mining (the Special Areas) did remain depressed for much of the decade, and only re-armament ahead of the war stimulated growth again, but for much of the nation recovery came much earlier. Trefgarne claims that the UK was well ahead of most of the rest of the world in coming out of depression (only Germany grew faster), and that the period was one of industrial and technical innovation (and an obsession with world speed records!), an infrastructure and housing revolution, and improved leisure time (paid holidays, a cinema boom).

Perhaps one problem that we face today, that makes the UK’s 1930s solution difficult to implement today is that the tighter fiscal stance then could be offset with looser monetary policy – a policy tool that Trefgarne says was necessary to run alongside the austerity. As we approach the zero bound in interest rates around the western economies, and when the Bank of England hints that it finds diminishing returns from more and more Quantitative Easing, those monetary tools are unavailable. Olivier Blanchard, chief economist of the IMF, suggests that the reason for the negative fiscal multipliers being perhaps 3 times higher in this current downturn than they had expected them to be (1.5x versus 0.5x) is exactly this effect – monetary policy can no longer offset fiscal policy tightening. Additionally, when the UK came off the Gold Standard in 1931, the depreciation of sterling was very beneficial to UK exporters – I think that this currency depreciation was the most important factor in the UK’s eventually recovery. It’s also interesting to note that at the recent IMF/World Bank meetings in Tokyo (see my video here), Blanchard used the UK in the 1930s as an example of exactly why austerity failed, so the data from that period can be interpreted in very different ways!

I highly recommend you read Metroboom – it’s a short and concise economic history of the UK in that period with some great colour too (Neville Chamberlain at the time was regarded as a dynamic, media savvy “Man of the Year”, the Navy came close to mutiny following wage cuts, and 180 lidos were built in the decade). It’s interesting to have a different view to the commonly held one that the UK’s policies were disastrous whilst the New Deal Keynesian policies of the US proved to be the way to get out of Depression.

We have 20 copies of the Metroboom booklet to give away to the first names out of the hat with the correct answer to this question:

Which famous train broke the speed record between London and Edinburgh in 1938?

Terms and conditions here. Enter here or email us at bondvigilantes@mandg.co.uk

Congratulations to the 20 winners named below – we will be in touch to get your copy of Metroboom to you. My question turned out to be a little ambiguous. I was looking for The Mallard as the answer to the question, as it hit a record speed of 126 mph at one point between London and Edinburgh in 1938. However, the Flying Scotsman set the record time for the entire journey between London and Edinburgh. In light of the confusion I generated, both answers were accepted. Thanks to everybody who entered, and good luck if you are attempting the annual Bond Vigilantes Christmas Quiz!

William Blake, Quilter
Chris Summers, FAMC Ltd
John McLaughlin, Brewin Dolphin
Nigel Farmer, Charles Stanley
Rachel Revesz, Citywire
Harry Rogers, Bentley Reid & Co
Joanna McIntyre, Standard Life Investments
John Slater, Medicas
Chris Spink, Thomson Reuters
Chris Rule, Kingfisher Financial
Herman Bakker, VSB
Jacob Nelson, BIS
John Topalian, Topalian Associates
Neil McHaffie, KM Financial
Mateusz Malek, Killick & Co
Mark Jones, Brewin Dolphin
Debbie Behrens, Charles Stanley
Richard List, J O Hambro Investment Management
Ian King, The Times
Bill Crowley, Independent IFA

Bond Vigilantes book – make a donation to support Cancer Research

Posted on 9 February 2012 by Jim Leaviss

To celebrate the 5th anniversary of the Bond Vigilantes blog, we’ve put together a book of 100 of our articles. From the first signs of weakness in the US housing market through to the disaster of the European Financial Stability Facility, this is an honest record of what the team have been thinking through the most turbulent period in financial markets since the Great Depression. You can also find out about Monster Munch price inflation, and cringe at Richard Woolnough’s terrible punning blog titles (“Icelandic geysers say No”).

M&G has paid for all printing costs, so that all proceeds go straight to Cancer Research UK. The amount you donate is entirely voluntary – we suggest £10, but for our investment bank contacts, the sky is the limit really. There’s also a free e-book version available for you.

Click here to get hold of a copy of the Bond Vigilantes book. There’s also a quick video below talking about the blog’s anniversary. Thanks very much for your support and comments over the past few years – we’ve enjoyed writing it, and we’ve learnt a lot from it – not least that I must never, ever, ever, write about Scottish Independence again.

The 2011 Bond Vigilantes Christmas Quiz – the answers and the winners

Posted on 19 December 2011 by Jim Leaviss

Thank you for another bumper haul of Christmas Quiz entries. This year’s winner is Dan Looney, with 20/20. Dan will be familiar to those M&G clients in the South West of the UK, as he used to cover that region for us a decade or so ago when he worked here. He was genuinely first out of the hat – the others in the full house club are Richard Sullivan, Sam Morton, Mark Dufton and Nick Tudball. Also winners, and on 19/20, are Simon Evan-Cook, Jonathan Peberdy, Andrew Mann, Adam Weidner, Gary Lee, and Chris Ramsden. The best M&G entry was from Dominic Harlow, 19/20.

Dan gets to chose a charity for us to make a £200 donation to (we’ll tweet it @bondvigilantes when he’s told us), and we’ll be in touch with the rest of you to get your addresses so we can send you a copy of Michael Lewis’s Boomerang.

The answers are below. For question 8, we also accepted Running Man, or Batman and Robin (also Arnie/Jesse films). We accepted both 15 or 16 for question number 18, as it depends on whether you think Hong Kong is a sovereign nation or not.

The picture is of Glenn Burke, formerly of the Oakland As baseball team. The hand signal he invented was the “high five”.
The only member of the Smiths to have a UK number 1 single, was Craig Gannon (who was in the Smiths in 1986). Previously he had been a member of the Bluebells, and Young at Heart was number one for 4 weeks in 1993 when it was reissued after being used in a VW advert. There was a moment of panic when someone claimed that Andy Rourke played on Sinead O’Connor’s Nothing Compares 2 U – but we couldn’t evidence that (he did play on some of her records), and it wouldn’t have impacted the result.
Hammersmith & Fulham has 3 Premier League football clubs within it – QPR, Fulham and Chelsea.
Brian Binnie won the X Prize in 2004 by piloting SpaceShipOne, the first private manned vehicle, into space.
Wenlock and Mandeville are the 2012 Olympic mascots.
Peter Auty sang “Walking in the Air” in the film The Snowman (Aled Jones sang it for a record release).
Bluetooth technology is named after a Danish Viking king.
The film Predator features two future US Governors – Arnold Schwarzenegger and Jesse Ventura.
The picture shows the gravestone of Tony Wilson, Factory Records boss.
We are the Champions by Queen was determined to be the catchiest song of all time, according to scientists at Goldsmiths University this year. YMCA came second.
The Power of Love charted 3 times in 1985 with different versions by Frankie Goes to Hollywood, Huey Lewis and the News, and Jennifer Rush.
The picture shows the bike that Eddy Merckx used to break the hour record.
A neutrino may have travelled faster than light between Switzerland and Italy in an experiment earlier this year.
An email which may have implicated senior newspaper executives in the phone hacking scandal was titled “For Neville”.
The picture is what the new ECB headquarters in Frankfurt will look like when it’s finished, unless they decide they don’t need so much space going forward.
Rooster is the character played by Mark Rylance in the hit play, Jerusalem.
They were the first names of the Republican Party presidential nominee candidates at the time that we published the quiz.
There are still 16 AAA rated sovereign nations, according to S&P. Australia, Austria, Canada, Denmark, Germany, Finland, France, Hong Kong, Norway, Netherlands, Liechtenstein. Luxembourg, Singapore, Sweden, Switzerland, United Kingdom.
The diagram is Charles Minard’s Map of Napoleon’s Russian Campaign of 1812 (overlaying a Sankey diagram onto a geographical map).
The President of the Italian Football Association urged Serie A football players to buy Italian government bonds as a patriotic duty.

Thanks again for all the entries, and Happy Christmas to everyone. I think we’ll post the bond team’s Desert Island Discs next week, but apart from that, it’ll be quietish here until 2012.

The 2011 Bond Vigilantes Christmas Quiz

Posted on 1 December 2011 by Jim Leaviss

Here’s the 5th annual Bond Vigilantes quiz. Twenty questions. The closing dates for entries is midday on Friday 16th December. Please email your answers.

Given a doubling of our readership over the last year from 6,000 separate visitors per month to 12,500+ we are more than doubling our prize pool. However, as it’s all about the glory of victory we will be donating the top prize of £200 to the charity of the winner’s choice. The winner and the next nine best scores will receive a copy of Michael Lewis’s Boomerang (I just finished it – excellent but pretty depressing).

See below for details of entry. Good luck – as always you may not need 20/20 to win a prize.

1. Which hand signal did this guy invent?

2. Which member of the Smiths is the only one to have had a UK number 1 hit single?

3. Which borough has the greatest number of UK Barclays Premiership men’s football clubs in it?

4. In October 2004, a man called Brian travelled just under 70 miles to achieve which world record?

5. Who are Wenlock and Mandeville?

6. Who sang “Walking in the Air” in the film The Snowman?

7. Which telecoms innovation is named after a Danish Viking king?

8. What’s the only action film to feature two future US Governors?

9. Who’s gravestone is this?

10. “Scientists” discovered this year that the world’s catchiest song of all time is…?

11. The same song title, three completely different songs, the same year, all charted highly in the UK. Title of the song?

12. Who’s bicycle was this?

13. What may have broken some pretty important laws in travelling from Switzerland to Italy earlier this year?

14. What was for Neville?

15. What will this (probably) be when it’s finished?

16. Rooster lives in a Wiltshire caravan – which award winning play?

17. What links Michele, Herman, Jon, Gary, Ron, Rick, Mitt, Rick and Newt?

18. As at today’s date, how many AAA rated sovereign nations are there according to S&P?

19. What is this famous diagram showing (broadly)?

20. What did former Italy and Roma midfielder Damiano Tommasi, now President of the Italian Football Association urge Serie A football players to buy on Monday 28th November?

To enter the competition, please click here and to view the T&Cs, please click here.

The information we collect from you is used solely to to notify you should you win the competition.

@bondvigilantes: theTwitter feed is live!

Posted on 1 August 2011 by Jim Leaviss

We’ve finally activated our long dormant Twitter account, and you can now follow us.

Click here to follow @bondvigilantes.

To start with we’ll simply be tweeting links to new articles on this blog, but once we’ve got the hang of it we will use Twitter to link to articles we think are interesting, retweet stuff by people we follow ourselves, and, on exciting days (budgets, elections, economic meltdowns) maybe give our blow-by-blow thoughts on the world. In common with the blog itself, tweets about our funds, performance etc. will be off limits. We’ll keep it entirely focused on bond markets and economics.

All of this will be subject to getting the day job done of course, so forgive us if it takes us a while to match Stephen Fry’s 9,145 tweets. In the meantime I am trying to work out the difference between an @ and a #.

Please also let us know if there’s anybody that we should be following. My favourites so far? @zerohedge, @lcdnews, @boe_news and @ftfmforum.

An update on the impact of the VAT rises in the UK compared to Australia and Japan

Posted on 28 March 2011 by Jim Leaviss

Here’s an update of a slide we produced a year ago following the January 2010 move back to 17.5% VAT from the 15% emergency rate. We were comparing the UK’s retail sales numbers to those in Australia and Japan around the time of their consumption tax hikes, and asking whether we’d see pre-loading of purchases ahead of the sales tax and a collapse back afterwards. The blue line shows that there was some deterioration in sales post the tax rise, but it was probably not as pronounced as we might have expected.

blogimage

With a move up in VAT again, this time to 20%, we can see how things are going this year. Remember that December’s weather was pretty grim, and that the VAT hike was on 4th January – so there was pent up demand post Christmas and 3 days of shopping in January before the hike came in. We can see that sales rose in January – which wasn’t in the script! Last week though we saw the release of February’s official retail sales data showing a fall of 0.8% compared with January. Department store sales were especially weak (down 3.2% on the month). If we see a similar pattern to last year, we could expect the year on year rate of retail sales growth to turn negative hereafter.

The VAT hike might actually turn out to be relatively trivial to consumers in the scheme of things. Whilst sales fell, shops saw the biggest increases in prices (the deflator) for years – this was the biggest month on month increase in the price deflator since the series began in 1988, and only a part of this was due to the VAT rise. Clothing and footwear inflation was especially strong. The next few months could be very tough for retailers.