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☆ Bond yields to climb 'for the wrong reasons' next year — and it will affect stocks, strategist says
▼ + stars: | 2022-12-23 | by ( Elliot Smith | ) www.cnbc.com time to read: +3 min

watch nowLONDON — Government bond yields are likely to rise in 2023 "for the wrong reasons," according to Peter Toogood, chief investment officer at Embark Group, as central banks step up efforts to reduce their balance sheets. Bond yields move inversely to prices. I still think bond yields will shift higher for the wrong reasons ... Meanwhile, U.K. government bond yields jumped so aggressively that the Bank of England was forced to intervene to ensure the country's financial stability and prevent a widespread collapse of British final salary pension funds. "You notice bond yields, are they collapsing when the market falls 2-3%?

☆ Morning Bid: Questions after the storm
▼ + stars: | 2022-12-21 | by ( ) www.reuters.com time to read: +3 min

A look at the day ahead in European and global markets from Wayne Cole. A day after the Bank of Japan's bombshell and things are looking a little steadier. Most Asian share markets and U.S. stock futures are up, and the Nikkei down only modestly. Analysts assume a formal shift will come after Japan's Spring wage talks and BOJ chief Kuroda's retirement in April. Analysts also suspect the BOJ shift meant the days of Japan desiring, or just accepting, a lower yen were over and the fallout in carry trades has been vicious.

As the Federal Reserve, European Central Bank, Bank of England and other Western central banks to varying degrees drained the liquidity punchbowl this year by raising rates and initiating quantitative tightening, the BOJ was on the other side with People's Bank of China filling it back up again. Liquidity support for world markets next year was always going to dwindle, but few would have had a possible BOJ halt to asset purchases on their bingo card so soon. ROCKY ROAD AHEADThis year has been one of the worst ever for world markets, hammered by multi-decade high inflation and interest rates across much of the developed world, and a rampant dollar. "The largest expansion of central bank balance sheets in history will give way to the largest contraction in history," they said. The ECB last week laid out plans to stop replacing maturing bonds from its 5 trillion euro ($5.31 trillion) portfolio.

☆ FTSE 100 tracks global risk-off mood; Petrofac plummets
▼ + stars: | 2022-12-20 | by ( Johann M Cherian | ) www.reuters.com time to read: +2 min

SummarySummary Companies FTSE 100 down 0.2%, FTSE 250 down 0.6%Petrofac plummets to all time lowSage group slumps to bottom of FTSE 100Dec 20 (Reuters) - UK's export-oriented FTSE 100 index fell on Tuesday as investors turned risk-averse after the Bank of Japan unexpectedly tweaked its monetary policy, while oil services provider Petrofac dropped to an all-time low. The blue-chip FTSE 100 (.FTSE) fell 0.2%, while the mid-cap FTSE 250 was off 0.6%. The Europe-wide STOXX 600 index (.STOXX) was down 0.5%. Weighing on global equities, the Bank of Japan widened long-term yield controls that allow long-term interest rates to rise more. Reporting by Johann M Cherian in Bengaluru; Editing by Maju SamuelOur Standards: The Thomson Reuters Trust Principles.

While governments worldwide are grappling with high inflation and low growth, UK policymakers are still rebuilding fiscal and political credibility following the brief, chaotic premiership of Liz Truss. Worries about growth are leading some investors to limit their holdings of the pound and British debt. Reuters GraphicsForeign investors have traditionally been attracted by Britain's strong rule of law, stable governance and thriving financial and professional services sector. In the latest data, up to the second quarter of this year, FDI represented more than half the net outflow - a result of strong UK investment abroad but weak inward investment too. Stephen Welton, executive chairman of major growth capital investor BGF, said attracting foreign investment was like a global competitive sport - one that Britain had previously excelled at.

☆ BoE sells 3.1 billion pounds of gilts, almost completes unwind
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +1 min

LONDON, Dec 16 (Reuters) - The Bank of England sold 3.097 billion pounds ($3.77 billion) of long-dated and index-linked gilts on Friday, taking to 17.1 billion pounds the total volume of these bonds it has sold in three weeks of sales to unwind earlier emergency purchases. The BoE has now sold almost 90% of the 19.3 billion pounds of government bonds it bought between Sept. 28 and Oct. 14, when it stepped in to stabilise the market after prices slumped after September's mini-budget. Sales reflect the volume of demand, and are not pre-determined, unlike the BoE's recent auctions to sell a total 6 billion pounds of short- and medium-dated gilts bought under its main quantitative easing programme. The BoE rejected 346.7 million pounds of bids submitted by investors during Friday's purchase window. The BoE is due to resume sales of these gilts in the week starting Jan. 9.

☆ Bank of England sells 1.4 bln pounds of long-dated and index-linked gilts
▼ + stars: | 2022-12-02 | by ( ) www.reuters.com time to read: 1 min

LONDON, Dec 2 (Reuters) - The Bank of England sold 1.412 billion pounds ($1.72 billion) of long-dated and index-linked gilts on Friday, taking to 3.65 billion pounds the total volume of gilts it has sold since starting to unwind earlier emergency purchases on Tuesday. Friday's sale was the third this week, as the BoE seeks to unwind the 19.3 billion pounds of purchases it made between Sept. 28 and Oct. 14, when it stepped in to stabilise the bond market after prices slumped following September's mini-budget. The BoE accepted the full amount of bids submitted by investors during Friday's purchase window. ($1 = 0.8186 pounds)Reporting by David Milliken; Editing by Kate HoltonOur Standards: The Thomson Reuters Trust Principles.

☆ Give up on a traditional 60-40 portfolio in 2023 and adopt this unconventional allocation, according to a US stock chief for French financial giant SocGen
▼ + stars: | 2022-11-29 | by ( Marley Jay | ) www.businessinsider.com time to read: +5 min

Kabra laid out his strategy for investing in stocks, bonds, and credit. People have argued for years that a traditional 60% stock and 40% bond portfolio no longer makes any sense. A multi-decade bull market in bonds translated to high prices and low yields, while stock market returns were outstanding. If the purpose of the traditional portfolio was for bonds to provide stability and keep investors' money safe during tough times, it didn't work. Kabra explained that he's cut his stock allocations to barely half of what the 60-40 formula recommends.

☆ Bank of England gets solid demand at 750 mln pound bond sale
▼ + stars: | 2022-11-28 | by ( ) www.reuters.com time to read: 1 min

LONDON, Nov 28 (Reuters) - The Bank of England said it received bids totalling 2.39 times the 750 million pounds ($903.75 million) of gilts with a maturity of 7-20 years which it sold at auction on Monday. This represents stronger demand than at the BoE's last gilt auction on Nov. 24, when it received bids worth 1.92 times the volume of bonds on offer. British government bond prices were little changed after Monday's auction result, which was the sixth of eight auctions the BoE is holding in November and December. ($1 = 0.8299 pounds)Reporting by David Milliken, Editing by Kylie MacLellanOur Standards: The Thomson Reuters Trust Principles.

☆ Asset manager names a UK sector that's now turned 'toxic,' revealing two stocks to bet against
▼ + stars: | 2022-11-25 | by ( Ganesh Rao | ) www.cnbc.com time to read: +3 min

The U.K. commercial property sector has become a "toxic environment" for investors, according to Plurimi Wealth's chief investment officer. Shares of British Land and Land Securities have fallen by 23.1% and 18.5% this year, respectively. With U.K. government bonds offering a yield of about 3%, commercial property valuations have fallen to compensate for a rise in yields above sovereign gilts. British Land now offers a yield of 7.1%, a full percentage point above its long-term average, according to UBS. The investment bank suggests that with every 0.5 to 1 percentage point rise in yield, values fall by 15-20%.

REUTERS/Richard Carson/File PhotoLONDON, Nov 23 (Reuters) - You can sometimes buck the market - for a time at least. Even mention government or central bank intervention in financial markets to many professionals and you elicit a tirade on such futility against forces beyond control. Against that, this year was marked by three very different examples of direct financial market intervention that appear to have succeeded in their narrow and targetted goals at least - despite many doubts whether they would or even could work. And it was at least in some part due to the SPR intervention, even if that was aided by central bank tightening and slowing world demand. All three examples of market intervention had their own dynamics and drivers.

☆ Bank of England confirms start of new gilt sale programme
▼ + stars: | 2022-11-23 | by ( David Milliken | Gibran Naiyyar Peshimam | ) www.reuters.com time to read: +2 min

The BoE intends to offer gilts for sale on Tuesdays, Wednesdays and Fridays, giving minimum prices that it will accept before each sale. "There will be instances when the Bank could sell a larger volume of gilts if demand is particularly strong, but also times when the Bank will sell few or no gilts if there is insufficient demand," the BoE said. On days when the DMO had held a long-dated gilt auction, the BoE would only sell index-linked gilts and vice versa. The BoE said it would publish details of the gilt sales as soon as possible after each sales window closed. ($1 = 0.8312 pounds)Reporting by David Milliken, Editing by Kylie MacLellanOur Standards: The Thomson Reuters Trust Principles.

☆ Bank of England projects more than 30 bln pounds of annual QE losses
▼ + stars: | 2022-11-22 | by ( David Milliken | ) www.reuters.com time to read: +2 min

LONDON, Nov 22 (Reuters) - Britain's government may need to pay the Bank of England more than 30 billion pounds ($36 billion) next year and also in 2024 to cover losses on its quantitative easing (QE) programme, a report released by the central bank on Tuesday showed. The BoE started buying government bonds in 2009 and the size of the QE programme peaked at 895 billion pounds in December 2021, including 20 billion pounds of corporate bonds. Under terms agreed at the start, Britain's finance ministry receives any profits from QE - but must compensate the BoE for any losses. Last month, Britain's finance ministry paid the BoE 828 million pounds to cover QE losses. Looking out to 2033, the cumulative net loss on the QE programme could range from less than 50 billion pounds to almost 200 billion pounds, depending on the path of interest rates, the projections showed.

And for financial markets it begs the question as to whether the extent of the monetary or fiscal tightening currently assumed will ever actually happen. The OBR reckons UK consumer price inflation has now peaked and will back off to a full-year rate of 7.4% next year. But assuming standing market forecasts for energy prices and BoE rates, it then sees inflation fall below zero for eight quarters from the middle of 2024. The BoE also expects headline inflation to plummet into 2024 - and its 'fan chart' of the range of possible outcomes also has an outside chance of deflation then too. Delaying spending cuts until after an election won't help much in that regard if indeed they're seen necessary at all.

LONDON, Nov 17 (Reuters) - The pound rose for a third day against the dollar on Thursday ahead of finance minister Jeremy Hunt's new budget full of "tough but necessary" measures to control inflation. Against the euro , sterling has only risen by around 6% since late September and by 9% against the yen. Benchmark 10-year gilts are around 3.3%, their lowest since mid-September, just before Truss and Kwarteng released their budget. Typically, this would have dragged on the pound, given the lower yield advantage it affords investments in sterling. Adding an extra element of risk on Thursday, are the economic forecasts of the independent Office for Budget Responsibility, which did not release any kind of breakdown of the impact of Truss' budget in September.

☆ The UK has laid out a $65 billion package of tax rises and spending cuts to restore faith after political upheaval and a market storm
▼ + stars: | 2022-11-17 | by ( George Glover | ) www.businessinsider.com time to read: +3 min

The UK's finance minister Jeremy Hunt has laid out a £55 billion package of tax rises and spending cuts. The government wants to restore credibility after a prior tax plan drove the pound to an all-time low. The fiscal plan will be divided roughly equally between tax rises and spending cuts, Hunt said. That goes contrary to the tax plan laid out by former finance minister Kwasi Kwarteng, which called for huge tax cuts. Read more: UK inflation tops 11% to hit its highest level since 1981 as food and energy prices soar

☆ UK bond dealers see jump in gilt issuance for 2023/24 - Reuters poll
▼ + stars: | 2022-11-16 | by ( David Milliken | ) www.reuters.com time to read: +4 min

However in the 2023/24 financial year, gilt issuance is expected to jump to 238 billion pounds, according to the median poll forecast, the second highest ever after the 486 billion pounds of issuance in 2020/21 to fund COVID-19 support measures. “It feels like there shouldn’t be too many surprises, but the gilt market remains febrile, and even small news could create oversized reactions,” he said. Gilt issuance is distinct from public sector net borrowing (PSNB), the main borrowing measure forecast by Britain’s Office for Budget Responsibility. Here GEMMs expect PSNB, excluding public-sector banks, to rise to a median 187 billion pounds, almost double the 99 billion pounds forecast by the OBR in March. Next year it is forecast to fall to 142 billion pounds, versus an OBR forecast of 50.2 billion pounds.

LONDON, Nov 15 (Reuters) - The moment of truth is almost here for Britain's new prime minister Rishi Sunak and finance minister Jeremy Hunt. British markets have regained some poise after the carnage triggered by September's fiscal statement, but as the UK slips into recession, the outlook is far from rosy. Here's a look at some of the likely winners and losers from Thursday's budget. "Domestic UK equities are being treated with caution by investors both domestically and internationally," he said. snapshotA CRUDE TARGETEnergy companies have reported bumper profits this year, thanks to soaring crude oil and gas prices.

☆ Despite the recent chaos, UK stockpickers are rubbing their hands: Here's what they're buying
▼ + stars: | 2022-11-10 | by ( Elliot Smith | ) www.cnbc.com time to read: +6 min

The U.K. has been beset by political and economic instability in recent months, but as the investment environment undergoes a fundamental transition, investors see opportunity. These attractive valuations for U.K. stocks were also identified in a note last week by BlackRock Fundamental Equities. "Not only has the U.K. discount widened to a level not seen since 2008, but companies are buying back record amounts of their own shares. This compares to the current yield on UK 10-year gilts of around 4%." GAM holds around 50% of its U.K. equity income portfolio in small and midcap stocks, with a focus on companies with strong competitive moats.

☆ Bank of England to start selling emergency gilt purchases from Nov. 29
▼ + stars: | 2022-11-10 | by ( David Milliken | ) www.reuters.com time to read: +2 min

In a statement on Thursday, the BoE said it would be open to offers from investors to buy the bonds from Nov. 29 onwards. Unlike the BoE's separate programme of auctions to unwind some of its more than 830 billion pounds of quantitative easing bond purchases, these sales will not take place at a fixed pace. "As a general principle only bids that are deemed attractive relative to prevailing market levels will be accepted," the BoE said. It called the plan "a demand-led approach to unwind recent financial stability gilt purchases in a timely but orderly way". New finance minister Jeremy Hunt is expected to announce around 50 billion pounds of fiscal tightening in a budget statement on Nov. 17.

For the second time in less than three years, the Bank of England has made an emergency intervention in the market for UK government bonds. Investors rushed to liquidate assets, including money market funds which held UK government bonds. The latest intervention was triggered by excessive leverage in UK pension funds, which had borrowed to boost returns using a strategy known as liability-driven investing (LDI). To prevent future blow-ups, regulators could cap money market funds’ exposure to less liquid assets, reducing the risk of a run by investors. Financial market regulators in European fund centres like Ireland and Luxembourg have stepped up surveillance of LDI strategies used by UK pension funds, the Financial Times reported on Oct. 28.

☆ We're not 'inflation nutters,' top Bank of England economist says
▼ + stars: | 2022-11-08 | by ( Elliot Smith | ) www.cnbc.com time to read: +1 min

The Bank of England accepted a record amount of gilts at a reverse auction on Wednesday. LONDON — Bank of England policymakers are not "inflation nutters" but tightening of monetary policy is necessary to prevent surging prices becoming entrenched in the economy, the central bank's Chief Economist Huw Pill said Tuesday. "We're not meant to be inflation nutters. We are meant to sort of manage this trade-off in a way that avoids unnecessary, counterproductive maybe, disruptions to the real economy," Pill said at a conference organized by Swiss bank UBS . The Bank of England has come under criticism for being too slow off the mark in its efforts to rein in sky-high inflation.

☆ Bank of England wants more transparency for 'non banks' after gilts turmoil
▼ + stars: | 2022-11-07 | by ( Huw Jones | ) www.reuters.com time to read: +4 min

[1/3] Traders work on the trading floor of Barclays Bank at Canary Wharf in London, Britain December 7, 2018. It shone a light on the less regulated global $200 trillion 'non-bank' sector which is made up of pension funds, insurers and different types of investment funds, and spans borders. The onus for building resilience in the non-bank system sits first and foremost with the firms themselves," Breeden added. Banks and non-banks also need to improve stress-testing for risks, she added. Toks Oyebode, executive director for regulatory affairs at JPMorgan bank, said steps outlined by Breeden and other regulators, such as regarding margining, were timely.

☆ More transparency needed for 'non banks' after gilts turmoil, says Bank of England
▼ + stars: | 2022-11-07 | by ( Huw Jones | ) www.reuters.com time to read: +3 min

It shone a light on the sprawling and less regulated 'non-bank' financial sector which is made up of pension funds, insurers and different types of investment funds, and spans borders. The onus for building resilience in the non-bank system sits first and foremost with the firms themselves," Breeden added. "Beyond improving transparency, regulators will need to consider how best to ensure leverage is well managed. Banks and non-banks also need to improve stress-testing for risks, she added. Reporting by Huw Jones Editing by Gareth Jones and Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

☆ More transparency in 'non banks' a first step after gilts turmoil, says Bank of England
▼ + stars: | 2022-11-07 | by ( ) www.reuters.com time to read: +1 min

LONDON, Nov 7 (Reuters) - Improving transparency of 'non-banks' such as pension funds is a first step in applying lessons from recent turmoil in Britain's government bond market, Bank of England executive director Sarah Breeden said on Monday. It shone a light on the sprawling and less regulated 'non-bank' financial sector made up of pension funds, insurers and different types of investment funds. Breeden said the LDI issues were a reminder of the "systemic risks" posed by poorly-managed leverage in the non-bank financial system where there is "all too often" excessive risk taking alongside improper liquidity risk management. "Transparency is an important first step. Reporting by Huw Jones Editing by Gareth Jones and Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

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