Index-linked markets were sent into a tailspin yesterday as Chancellor Sajid Javid responded to an earlier letter from the UK Statistics Authority (UKSA), which had set out recommendations for the reform of the RPI. The longest-dated linkers (maturing in 2065 and 2068) fell by more than 9% as breakeven rates plummeted.
Javid’s response contained three big shocks for index-linked markets:
… Read the article
With Brexit in every headline, it’s hard not to form an opinion on the possible outcome for the UK. Investors are getting increasingly edgy about the impact on certain asset classes, and I have read many articles predicting which sectors will do well in various exit scenarios. Sterling credit has remained healthy since the referendum, led by robust fundamentals and not by politics as the pound … Read the article
After a lengthy review, Britain’s House of Lords has finally said that the inflation index presently used to price inflation-linked securities, train fares or student loans should be replaced. Instead, the Consumer Price Index (CPI) should become the new benchmark, as it includes more items and has an overall higher credibility. So far, so good – except if you are an investor.
The statistics b… Read the article
In true market fashion, both stocks and bonds suffered in October, hit by concerns about the effects of rising rates and trade wars on economic growth and corporate profitability. The past month brought evidence of a slowdown, particularly in Europe and Asia: third quarter GDP growth in the Eurozone came in below expectations, dragged down by Italy’s flatness, while in Asia, Industrial Output i… Read the article
This week’s Budget and Bank of England meetings may shed some light on a key question for investors and millions of taxpayers: After eight years of fiscal tightening, is austerity over and will the economic burden shift from monetary to fiscal policy? I wouldn’t hold my breath – something which may cheer gilt investors, at least for now. Let’s see why:
In her recent Conservative Party conferenc… Read the article
After a decade dominated by extraordinary monetary stimulus that has kept interest rates and consumer prices at bay, the dog that didn’t bark is finally showing signs of life: inflation. As seen on the chart, both US and UK wage inflation have spiked in a tightening labour market – an old textbook recipe for further price increases to come. However, one has to look beyond the headlines to depic… Read the article
The Bank of England’s (BoE) Term Funding Scheme (TFS) came to an end earlier this year. As a brief recap, the scheme offered four year funding at the BoE Base Rate plus a fee to the banks and in turn, the banks were required to lend into the real economy (the fee was dependent upon the net lending of the bank). We previously wrote about the scheme here and here.
The borrowing scheme has been hu… Read the article
The current Conservative Government has pledged to meet its 2015 manifesto commitment to deliver one million homes by the end of 2020 and to “deliver half a million more by the end of 2022“. For this to be met, completions would need to rise to levels not seen since the late 1970s.
Unfortunately for the UK Government, increasing the housing supply has long been a difficult challenge. There has… Read the article
In December 2012, the then Governor of the Bank of Canada, Mark Carney, gave a speech entitled “Guidance” to the CFA Society of Toronto. Less than two weeks earlier, the UK Chancellor of the Exchequer, George Osborne, had announced that Carney would be the 120th Governor of the Bank of England (BoE). As this was Carney’s first public engagement since the announcement, traders and market economi… Read the article
The Slavery Abolition Act of 1833 formally freed 800,000 Africans who were then the legal property of Britain’s slave owners. What is less well known is that the same act contained a provision for the financial compensation of the owners of those slaves, by the British taxpayer, for the loss of their “property”. The compensation commission was the government body established to evaluate the cla… Read the article