Mr Bean doesn’t say much publicly, so the bond market spent last week pouncing on every utterance of his UK tour (usually without much regard for the context in which things were said) in an effort to answer the key question of whether or not the Bank of England would continue its program of Quantitative Easing.
Yesterday morning we got a few more clues after the minutes of the last Monetary Po… Read the article
The day after Richard’s ‘walking on custard‘ blog last week, the BoE announced that it was going to have a break from its QE program, at least until its quarterly Inflation Report comes out next month. The BoE had previously committed to buy back £125bn of gilts, £25bn short of the £150bn that the government had permitted. Market expectations had been for the BoE to announce that it would buy b… Read the article
The US bond market expects the Fed to start raising rates again at the start of 2010, if not earlier. The bond market is usually right, but maybe not this time. A speech last week by influential San Francisco Fed President Janet Yellen (seen as a possible candidate for Bernanke’s job, should he not get reappointed next year) suggested that keeping Fed funds rate at zero for several years is "… Read the article
Economic theory is simple – increase the supply of something, and its price should fall. Therefore to increase inflation, reduce the value of money by simply printing it. If this excess money is spent on a limited supply of goods and services, then inflation should pick up strongly. However if the cash is not used,and instead sits in bank vaults or safe deposit boxes, then the inflationary im… Read the article
Recent data releases in the UK have been interpreted as suggesting that the housing market may be showing signs of some form of recovery. Our interpretation, though, would be that the releases suggest merely that the pace of decline is slowing. On top of this important difference in interpretation, we would like to highlight the risk of a potential further turn down in housing market data.
In … Read the article
Some interesting ideas about how Japan (and by extension the rest of us) can get out of the deflation trap in today’s Times. The article, "To fight deflation, abolish cash", proposes that getting rid of physical money will allow policy makers to do something not possible in a world where the population can hoard bundles of bank notes in sock drawers – namely to set an effective negative nomina… Read the article
Longevity risk and pension fund deficits aren’t exactly new topics – one of the first ever comments on this blog was on precisely this subject (see here). But it’s going to become a bigger and bigger issue over the coming years, and this has huge implications for both bond investors and for the global economy as a whole. Last week the IMF made an important contribution to the debate with this… Read the article
Today we saw the release of May’s inflation data, which came in a little higher than the market expected. CPI is running at 2.2% on an annual basis, and RPI remains in deflation, at -1.1%. Food and energy prices continue to be disinflationary factors, whilst the prices of DVDs, TVs, clothing and footwear rose. There was a rise in average mortgage payments too, which impacted the RPI number, … Read the article
We’ve talked about new issuance a few times recently on this blog (see Matthew’s blog from December here and my more recent comment about the record issuance in Q1 here). But the focus has been firmly on issuance in the investment grade market, until now.
The European public high yield primary market was essentially closed for 18 months, with no new issues at all from August 2007 until January … Read the article
Right now the most commonly submitted question to this blog is about the impact of QE, high budget deficits and zero rates on inflation. Most people are inclined to think that after a brief period of deflation, largely as a result of lower year on year energy prices, we’re heading into hyperinflation. I guess my cop out answer to that question is that we just don’t know – it is uncharted terr… Read the article