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Bank of England

Is it time for the Bank of England to sell corporate bonds back to the market?

On August 4th last year, the Bank of England announced a series of easing measures in response to the Brexit referendum results. They were very concerned regarding a potential slowdown and collapse in both the economy and corporate confidence and so implemented a variety of measures; reducing interest rates, increasing liquidity lines for banks, and reintroducing their gilt and corporate bond p…

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CPI wHat?

In the UK, as of next month the official measure of consumer prices will become CPIH, with the H standing for housing.  As at today, the only difference between CPI and CPIH is the inclusion of owner-occupied housing in the latter, on a rental equivalence basis (“how much would it cost to rent the home I own?”, a similar measure to the Owners’ Equivalent Rent component of US CPI), which has a w…

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“Venetians, Volcker and Value-at-Risk: 8 centuries of bond market reversals”. Our interview with Bank Underground’s Paul Schmelzing.

It’s rare to find a piece of writing that EVERYONE in bond markets has read and is talking about, but in January, a blog by Paul Schmelzing on the Bank of England’s excellent Bank Underground site did just that.  Paul is a visiting scholar from Harvard University, working at the Bank of England to research foreign exchange policy in the era of Bretton Woods.  In the blog however he took a very …

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The BoE and ECB render the US bond market the only game in town

Now that the Bank of England has commenced purchases of gilts and committed to a programme of corporate bond buybacks, alongside similar measures being presently undertaken by the ECB, it is worth taking a step back and thinking about valuations in sterling fixed income.

Let’s take a brief look at what has happened so far in 2016 in government bonds. The ultra-long conventional gilt has returne…

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Pre-exit, Brexit, what was it? Why the BoE should delay a change in monetary policy.

Post the Brexit referendum we are in an economic purgatory. The brexiteers are looking forward to a democratic led revitalisation of the economy, while the bremainers fear that the “little England” mentality will leave us isolated and depressed. Most people have an opinion, and the economic opinion that matters the most is that of the Bank of England (BoE). The market has absorbed the news of B…

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Is QE unquestionably supportive for risk assets? I think not.

We have written about quantitative easing (QE) many times over the years, yet there remains more to be said: the great QE experiment is not yet over. Given the result of the EU referendum, speculation is rife as to whether the Bank of England will embark on another round of QE to stimulate the UK economy; arguably making this a good time to debate the efficacy of such strategies.

It’s safe to s…

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Should the Bank of England start buying sterling corporate bonds again?

When the Bank of England’s Monetary Policy Committee meets next week, the market expects that they will cut rates, especially now that even outgoing hawk, Martin Weale (who has been at the Bank for 71 meetings so far, and voted to hike 12 times, and to hold 59 times) says that he will support a reduction.  A resumption of the Funding for Lending (FLS) scheme is also a possibility (many economis…

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The Bank of England could be about to unveil a bumper monetary policy package

Despite keeping interest rates on hold at the 4th July meeting, the minutes of the Monetary Policy Committee indicated that “most members expect an easing in August” (even long-time hawk Martin Weale has shifted to a dovish stance). Subsequently, markets are pricing in a staggering 98.3% probability of a rate cut at the next meeting in 8 days’ time. With UK data expected to deteriorate over the…

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Three reasons why the UK will not raise rates anytime soon

With the Fed recently raising its interest rates via a unanimous vote, I’ve been wondering whether the UK will shortly follow suit. The market seems to think not, pricing in the first UK rate rise in Q1 of 2017, compared to two further US rate hikes in 2016. At face value this huge divergence feels strange; both countries are targeting (and undershooting) a 2% inflation rate, both have similar …

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Contrary to popular opinion, the Bank of England’s next move will be a monetary easing

On the 7th of September £38bn worth of UK gilts (4.75% 2015) will mature. The Bank of England (BoE) own just under half the issue, having purchased the bonds through its £375bn quantitative easing (QE) programme. At this point in time, the BoE have indicated that they are committed to keeping the size of the QE program at £375bn. As a result of the 2015 bonds maturing, the bank will therefore h…

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