Monthly Archives:

March 2011

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

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 ther…

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Igor, he’s alive! – the corporate linker market shows signs of life

Has Bristol Water opened the tap on corporate inflation linked bond issuance? The water utility company came to market last Friday with a small £40m 30 year deal which pays a coupon of 2.701% plus inflation.

The interest payments on corporate inflation linked bonds – as the name suggests – move in line with inflation. Each issue has its own quirks but, as an example, the Bristol Water new issue…

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The UK Budget – growth down, gilt issuance up.

Once a year I head down to the Embankment, opposite the Houses of Parliament, to try to film a comment on the UK Budget whilst being heckled by wild eyed men drinking Kestrel Super, and pestered by packs of Italian students mistaking me for Brad Pitt making a movie about a tired fund manager in an ill-fitting suit.  Here’s this year’s Budget film.  If it sounds like I don’t think that the gover…

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Why the UK has a real rate problem

The financial crisis is resulting in the authorities, the public, and investment managers seeing things they did not expect to see. Today’s headline RPI level of 5.5% is a record 5% above the Bank of England base rate of 0.5%, resulting in a negative real interest rate (base rate – RPI) of -5%. This is the most divergent I’ve seen this in my 25 years in the city (see chart).

The bond bears th…

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How to give yourself the best chance of getting a ticket to the London 2012 Olympics opening ceremony

Applications for London 2012 Olympic Games tickets are now open. You beauty! Having been at the Sydney 2000 Olympic Games, I can honestly say that attending the Olympics is one of the highlights in my sport watching career (which includes watching Australia qualify for the football world cup, George Gregan’s tackle against New Zealand in the Bledisloe Cup and Steve Waugh’s last ball century aga…

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Iceland and its banks – a blueprint for Europe?

Much has been written about Iceland’s response to its banking crisis, and whether its decision to put its banks into administration and swiftly force losses onto bank creditors has proved to be the key to restoring economic stability. Does this provide a model that Ireland and others should have followed? Commentators such as Paul Krugman (see here) and the IMF were quick to point out that Icel…

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The ECB’s mandate says raise rates, but is the ECB’s mandate correct?

The European Central Bank firmly laid its cards on the table at last Thursday’s press conference. Trichet et al are in no mood to risk potential second-round effects of rising wages. According to JP Morgan the phrase ‘strong vigilance,’ uttered by Trichet during his prepared remarks, was used one month prior to all policy moves during the last tightening cycle. Not surprising then that Bunds so…

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Bond Vigilantes – a new look and feel for 2011

“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
James Carville, Clinton administration advisor, 1993

When we started the Bond Vigilantes blog back towards the end of 2006, the world looked pretty different – and even the term “bond vigilantes”…

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