Archive

September 28, 2022
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Dr BoE Brings Bonds to Heel for Healing

  • UK market misfunctioning has forced the BoE to intervene in-between meetings. It will buy gilts every day until 14 October without an overall limit.
  • That aggressive intervention is reassuringly responding to the real issue rather than blindly following commentators calling for rate hikes to match dysfunctional pricing.
  • The BoE has postponed its active gilt sales until 31 October. However, the forced U-turn within a week should highlight the risk of its worryingly non-state-dependent policy.

By Philip Rush


September 27, 2022
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BoE: Waiting for Broken Markets to Heal

  • Markets puked after the new UK government announced its fiscal plans, and panic ensued. Sterling and rates remain at historically extreme levels.
  • Rate rises are more than offsetting the inflationary effect of GBP devaluation, which suggests the BoE need not match hawkish pricing unless neutral rates have surged.
  • We struggle to see the BoE massively exceeding the Fed’s tightening pace and extent. Contrarian trades are tough, but that is arguably why the current spread exists.

By Philip Rush


September 26, 2022
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Trussonomics: The Politics

  • The consensus is that last week’s highly ideological mini-budget is fraught with risk economically. The same can be said for it politically. However, the Prime Minister has now set her course, and we should assume that at least this side of the next election, “The lady’s not for turning”.

By Alastair Newton