Monthly Archives:

May 2007

Is the UK housing market peaking?

Well the Mail and the Express can’t agree on the answer to this question, but official borrowing data released later this morning seem to suggest that it might be. Mortgage approvals (a good lead indicator of house prices) were at their lowest level for a year. The Nationwide house price index is also showing a weakening, if not yet price falls on a UK average level. There’s some good stuff in …

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Lies, damn lies, and statistics

The big question facing the Bank of England is whether the recent high inflation numbers will be transmitted through the labour market in a vicious inflationary circle. According to the official figures, wage inflation has so far been restrained. However, should one always believe the official statistics?

An article in today’s Financial Times entitled ‘Fears for quality as statisticians scatter…

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Scousers’ 20 Euro taxi tax pumps liquidity into Eurozone – rate hikes to follow strong M3 growth

With a less than satisfactory ‘I told you so’ look from Jim scant reward for my efforts in attending this year’s Champions League Final in Athens, I’ve taken more heart from the continued data flow (click the chart to enlarge) supporting my view of higher interest rates for Europe. In addition, I experienced first hand some inflationary gouging by the Greek taxi drivers – a temporary, and unoff…

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Bonds or cash in asset allocation? A question from an IFA.

Sent by anonymous, 23 May 2007:

"As an IFA I am constantly reminded to adopt the principles of asset allocation and ensure that most clients have a spread of equities and bonds within client portfolios. However the outlook for bonds from most quarters is poor and many investors are suggesting that their bond allocation would be better off in cash where the capital value is secure and the yield …

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A 1 in 3 chance of US recession – is Greenspan right?

We’ve talked a fair bit about the possibility of a significant US slowdown over the course of the next twelve months (see here). Now that we’ve cracked the dark arts of posting charts on our blog, I thought it’s worth showing you the simple yield curve analysis that lies behind both Greenspan’s, and the current Fed’s, thinking. History shows us that when long term bond yields in the US fall bel…

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The Monetary Policy Committee – united they stand, divided they fall

Today’s Bank of England MPC minutes show that the Committee is at last speaking as one. All nine members voted for a quarter of a point hike in rates to 5.5%. It is interesting to see such a strong consensus emerging. This is presumably due to the clearness of evidence presented in the May Inflation Report with regard to the upside inflation risk posed to the UK economy, and maybe the realisati…

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Champions League prediction – why Liverpool don't stand a chance

This has not been a great footballing year for the bond team. There are glum faces all round as our seasons have ended in disaster, to an extent that surely cannot be explained by random bad luck. We have, somehow, displeased the gods of football.

Here’s how it finished for our teams:
– David Fancourt’s Watford – relegated from the Premiership
– Richard Woolnough’s Chesterfield – relegated from…

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Takeover Tuesday

‘Takeover Tuesday’ was a phrase I came across describing several M&A deals announced earlier this week (Thomson & Reuters, Heidelberg & Hanson etc) and no doubt many more will follow in the coming weeks and months. I and other members of the team have written at length about this releveraging of corporate balance sheets, its implications for the corporate bond market and the implications for o…

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Greed is Good Again

20 years after Gordon Gekko told us that “Greed is Good” in Wall Street, 20th Century Fox has announced that a sequel called “Money Never Sleeps” is in pre-production. Is this the top of the market for equities then? The last film was released just ahead of the 1987 crash.

You used to have to rely on a shoe-shine boy to give you a stock-tip to gauge if the markets were getting frothy, but more …

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Back below letter-writing territory: UK inflation comes in at 2.8%

After last month’s 3.1% print for UK CPI caused Mervyn King to write a letter to the Chancellor, there was a bit of relief today as it fell back to 2.8%, in line with the market’s forecasts. This is still higher than the Bank will be comfortable with, and inflation has now been above the 2% target level for a year. The “old” RPI number also fell back, from 4.8% in March to 4.5% in April. Food …

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