Years in the bond markets:
Corporate bonds, inflation markets, financial institutions and credit default swaps
Almost all sport (not sure about dressage), Saturdays, cooking
Ron Burgundy, Superman, P.G. Wodehouse
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
Brexit caused a sharp decline in the value of the pound last week and has significantly increased expectations of higher inflation. The next few days could bring further moves – watch M&G fund manager Ben Lord discuss the potential scenarios and outcomes with Bond Vigilantes Editor Elena Moya. Watch the video
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 Financial Times today ran a story that the ONS has admitted errors in its measurement of the telecoms sector. It seems that the ONS has effectively been focussed on output of the telecom sector as based on turnover of the providers, and making a price assumption of the goods and services they sell. On this methodology, the ONS shows prices of telecoms were flat between 2010 and 2015, and tu… Read the article
UK CPI is now within a hair’s breadth of requiring a letter to the Chancellor. RPI increased to 3.9% from 3.6%, which was also above expectations. The increased fuel prices were expected this month, but August is also a high inflation month given transport price hikes that take place as people head away for their holidays, and as clothing and footwear prices are hiked with the new season’s coll… Read the article
The United States is fast approaching the point at which its indebtedness reaches its debt limit, which generally is approved by Congress without debate. Routinely in the past the debt ceiling would be raised, reflecting that it does not affect the amount of spending, but only makes sure the U.S. can pay for spending it is committed to whether by tax receipts or by borrowing. It is about ensuri… Read the article
The last time the US had an unemployment rate below 5% and inflation expectations around 2%, the Fed funds rate was above 5% and had been aggressively hiked in the preceding period. Yellen’s Fed has been happy to let rates stay low amongst a tight and tightening labour market because wage growth has been lower than one would expect for a jobs market as healthy as this one. So, slow growth of wa… Read the article
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… Read the article
1. We are at the point of peak oil pass through: January and February 2016 saw oil prices reach their lows ($34.25 Brent January 20th and $26.21 WTI, February 11th), so this week’s inflation numbers will see some high year-on-year oil price base effects, as will February’s. This is one of the main reasons why we have been seeing significant rises in inflation in recent months.
2. The upward mar… Read the article
The cost of new mortgage borrowing and payments on outstanding household debt can have a large impact on the rate of growth of an economy. For this reason, central bankers are interested in the transmission mechanism of monetary policy. It has been shown that interest rates can have a stronger influence on an economy where there are a high proportion of variable rather than fixed-rate mortgages… Read the article