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☆ UK bond turmoil leaves smaller pension schemes with longer-term costs
▼ + stars: | 2022-11-07 | by ( Carolyn Cohn | ) www.reuters.com time to read: +6 min

As pension funds scrambled for cash to meet margin calls, the Bank of England intervened to stabilise the market and avoid the collapse of some LDI-exposed funds. But pension schemes that could not meet margin calls in time - many of them smaller schemes - had their positions liquidated by LDI fund managers. Larger schemes in segregated funds were more likely to have retained their hedges, industry sources said. Large schemes in segregated funds pay lower fees for more volume - a benefit small schemes cannot enjoy. LDI fund managers BlackRock (BLK.N) and Insight Investment did not respond to requests for comment.

☆ BoE's Bailey confirms decrease in bond purchase cap
▼ + stars: | 2022-11-04 | by ( ) www.reuters.com time to read: +1 min

REUTERS/Hannah McKayLONDON, Nov 4 (Reuters) - Bank of England Governor Andrew Bailey said on Friday that the maximum size of the BoE's Asset Purchase Facility holdings can now be lowered to 886 billion pounds from 966 billion pounds, after the conclusion of emergency purchases last month. The BoE bought 19 billion pounds of long-dated and index-linked government bonds last month to halt a fire sale of assets by pension funds following former prime minister Liz Truss's mini-budget. Britain's finance ministry - which indemnifies the BoE against losses on its bond portfolio - approved a 100 billion pounds increase in the maximum size of the APF to 966 billion pounds, in case greater purchases were needed. Bailey, in a letter to finance minister Jeremy Hunt on Friday, said this could now be lowered to 80 billion pounds and would fall further as the BoE unwound its quantitative easing purchases. The BoE also aimed to sell the 19 billion pounds of long-dated and index-linked gilts in a "timely but orderly" way, Bailey wrote.

☆ BoE must sell emergency bond purchases in 'timely' way - Hauser
▼ + stars: | 2022-11-04 | by ( David Milliken | ) www.reuters.com time to read: +1 min

LONDON, Nov 4 (Reuters) - The Bank of England must sell in "a timely and orderly" way the 19.3 billion pounds ($21.7 billion) of government bonds which it bought as part of its recent emergency operation to support the market, a senior BoE official said on Friday. When the programme was launched, the BoE said it would sell the bonds purchased "in a smooth and orderly fashion once risks to market functioning are judged to have subsided". Hauser said the BoE still needed "to remain sensitive and, if necessary, appropriately responsive to still-febrile market conditions". However, Hauser said liquidity in the gilt market had not yet fully recovered. ($1 = 0.8910 pounds)Reporting by David Milliken Editing by William SchombergOur Standards: The Thomson Reuters Trust Principles.

☆ One central bank drama after another
▼ + stars: | 2022-11-03 | by ( ) www.reuters.com time to read: +2 min

SYDNEY, Nov 3 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole. Ironically, the more bonds price in a pivot, the less inclined the Fed will be to give them one. The Monetary Policy Report is out at noon (1200 GMT), followed by a news conference half an hour later streamed live on the Bank of England's website. Markets are priced for a hike of 75 bps to 3.0%, which amazingly would be the highest since 2008. In any event, the BoE is going to have to revise up its CPI forecasts and slash those for GDP, which will make for gloomy viewing compared to the comedy show that is government policy right now.

☆ VIEW Bank of England lifts UK rates to 3% in historic hike
▼ + stars: | 2022-11-03 | by ( ) www.reuters.com time to read: +5 min

REUTERS/Toby MelvilleLONDON, Nov 3 (Reuters) - The Bank of England raised UK interest rates to 3% on Thursday in its largest rate hike since 1989 and warned of a "very challenging outlook" for the economy. Money markets showed traders now expect UK rates to peak at 4.6% by next September, compared to expectations of 4.8% just two days ago. UK bank stocks (.FTNMX301010) fell 0.8%BONDS: Yields on the two-year gilt were last up 1 basis points at 3.041%, compared with 3.064% before the BoE announced its decision. Rates markets are pricing another 50bps hike at each of the December and February meetings, although still reflect a lower terminal rate than just a week ago. ANDREW ALDRIDGE, PARTNER AT DEEPBRIDGE CAPITAL, LONDON"Quelling rampant inflation and kickstarting a slowing economy left the Bank facing a difficult balancing act, with today's interest rate hike to 3% hardly surprising in this context.

[1/4] James Gorman, Chairman and Chief Executive of Morgan Stanley, speaks during the Global Financial Leaders Investment Summit in Hong Kong, China November 2, 2022. "It’s a painful transition, but not an unexpected transition," said Gorman, also the bank's chairman, at the Global Financial Leaders' Investment Summit. It was Hong Kong's biggest corporate event since it shut its borders in 2020 and introduced restrictions to combat COVID-19. Inflation and "very quick" monetary tightening after over a decade of relatively accommodative policies are making the world more volatile and uncertain, said Goldman Sachs CEO David Solomon (GS.N). If central banks find a way to tame inflation meaningfully and in a balanced way, it will "increase the chance of a soft landing" for their economies, Solomon said.

And economic policy is only gradually being taped back together before the BoE meets again. It's also pulled the implied peak Bank rate next year some 150bp lower to 4.75% over the same period - back below the assumed 'terminal rate' at the U.S. Federal Reserve. "We see the risks skewed towards the BoE sounding dovish this week and ultimately "underdelivering" versus current pricing," the Deutsche analyst wrote. Central bank rate hikes and SterlingReuters Graphics Reuters GraphicsThe opinions expressed here are those of the author, a columnist for Reuters. by Mike Dolan, Twitter: @reutersMikeD; Editing by Josie KaoOur Standards: The Thomson Reuters Trust Principles.

☆ Explainer: Why is the Bank of England selling government bonds?
▼ + stars: | 2022-11-01 | by ( David Milliken | ) www.reuters.com time to read: +6 min

Britain's central bank will be the first in the Group of Seven rich nations to actively sell QE bonds to investors. In August, the BoE said it wanted to reduce its total gilt holdings by 80 billion pounds over a 12-month period starting in late September. The BoE says it still intends to reduce total gilt holdings by the 80 billion pounds announced in August. It has not set a long-term target for gilt holdings. The BoE's upcoming 6 billion pounds of sales come alongside 37 billion pounds of gilt issuance by the government over the same period.

☆ Bank of England sells 750 mln pounds of gilts at first QE unwind auction
▼ + stars: | 2022-11-01 | by ( ) www.reuters.com time to read: +1 min

LONDON, Nov 1 (Reuters) - The Bank of England received solid demand from investors on Tuesday at its first auction to sell government bonds from its 838 billion pound ($961 billion) quantitative easing stockpile. The BoE aims to sell 6 billion pounds of gilts across eight auctions in November and December, as part of a plan to reduce its gilt holdings by 80 billion pounds over 12 months through a mix of sales and not reinvesting money from maturing gilts. Investors bid for 3.26 times the 750 million pounds of gilts with a remaining maturity of three to seven years which the BoE put up for sale. During standard British government bond auctions held by the United Kingdom Debt Management Office, investors typically bid for just over twice the volume of gilts available. These auctions normally are for larger volumes of gilts than the BoE is selling at its auctions.

☆ Bank of England sells £750 million worth of bonds at first QE unwind auction
▼ + stars: | 2022-11-01 | by ( ) www.cnbc.com time to read: +1 min

The Bank of England on Tuesday warned that "the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability." The Bank of England received solid demand from investors on Tuesday at its first auction to sell government bonds from its 838 billion pound ($961 billion) quantitative easing stockpile. Investors bid for 3.26 times the 750 million pounds of gilts with a remaining maturity of three to seven years which the BoE put up for sale. During standard British government bond auctions held by the United Kingdom Debt Management Office, investors typically bid for just over twice the volume of gilts available. These auctions normally are for larger volumes of gilts than the BoE is selling at its auctions.

After decades of decline, even into negative territory, term premium is rising again. chartchartchart"We are in a tectonic phase of monetary policy and you are getting asset dislocations across the board, including long bonds," said Solomon Tadesse, head of North American Quant Strategies at Societe Generale. A 30-year bond bought and held to maturity by a pension fund, for example, quickly becomes 'off the run,' so liquidity risk ends up lifting the term premium. In the week through Oct. 21 the 30-year bond's price fell for an eighth straight week, the longest selling streak since 2004. If the Fed is successful in driving down inflation or the economy goes into recession, more investors will flock to 30-year bonds.

☆ Bank of England poised to raise rates by most in 33 years
▼ + stars: | 2022-10-28 | by ( William Schomberg | ) www.reuters.com time to read: +4 min

On Aug. 4, the BoE raised rates by half a percentage point, its biggest increase in 27 years, and did so again in September. But the ongoing spread of inflation through Britain's economy this year means the BoE remains on high alert. FISCAL UNCERTAINTYInvestors are putting a roughly 90% chance on a 75 basis-point hike in Bank Rate to 3% on Nov. 3. The BoE's plan to start selling some of the bonds it bought since 2009 to support the economy will also ease some of the pressure to raise rates. Deutsche Bank said the planned 40 billion pounds' worth of sales over the next year were equivalent to about 25 basis points of rate hikes.

☆ UK's Sunak reconsiders tax rises -The Telegraph
▼ + stars: | 2022-10-26 | by ( ) www.reuters.com time to read: +1 min

Oct 26 (Reuters) - British Prime Minister Rishi Sunak is considering tax rises and major public spending cuts, according to The Telegraph. Sunak on Wednesday delayed the announcement of a keenly awaited plan for repairing the country's public finances until Nov. 17, two-and-a-half weeks later than previously planned. The report noted a rapid fall in the interest rate paid on government gilts and a reduction in the international gas price. Soon after Sunak became Britain's Prime Minister on Tuesday, he said difficult decisions lay ahead as he looks to cut public spending. Last week, The Telegraph reported that Hunt was considering up to 20 billion pounds of tax rises in a budget that was previously scheduled for Oct. 31.

☆ Asia stocks struggle as Xi's leadership team spooks markets
▼ + stars: | 2022-10-25 | by ( Anshuman Daga | ) www.reuters.com time to read: +4 min

MSCI's broadest index of Asia-Pacific shares (.MIAP00000PUS) fell to the lowest since April 2020 before an attempted rebound in beaten-down Hong Kong tech shares dragged it back to flat. "A short-term technical rebound is the main factor for today's rise," said Kenny Ng, a strategist at China Everbright Securities in Hong Kong. "(The) cumulative decline of Hong Kong stocks is deep." CHINA FLIGHTChinese markets remained volatile and jittery following Monday's withering selloff in Hong Kong. Xi Jinping's new leadership team has raised worries that China will increasingly prioritise the state at the cost of the private sector.

☆ Delayed, not denied
▼ + stars: | 2022-10-25 | by ( ) www.reuters.com time to read: +2 min

Markets have welcomed Sunak's appointment, with sterling creeping towards a one-month high and gilts rallying on the news. Register now for FREE unlimited access to Reuters.com RegisterMeanwhile, the did-they-or-didn't-they question around yen intervention continues. The beaten-down currency traded at 148.81 per dollar following two consecutive days of suspected Bank of Japan intervention straddling the weekend. Japanese Finance Minister Shunichi Suzuki insists the two policy objectives - monetary easing to get wage growth up and intervention to defend the yen - are not contradictory. ($1 = 0.8853 pounds)Register now for FREE unlimited access to Reuters.com RegisterReporting by Ankur Banerjee; Editing by Edmund KlamannOur Standards: The Thomson Reuters Trust Principles.

☆ Morning Bid: Delayed, not denied
▼ + stars: | 2022-10-25 | by ( ) www.reuters.com time to read: +2 min

☆ 'Unloved, undervalued' UK stocks back in focus on Rishi Sunak stability hopes
▼ + stars: | 2022-10-25 | by ( Elliot Smith | ) www.cnbc.com time to read: +4 min

Britain's new Prime Minister Rishi Sunak walks past Larry the cat outside Downing Street, in London, Britain, October 25, 2022. "The fact that we have Rishi Sunak as prime minister is definitely calming on markets. We believe that it is under owned, it's unloved, undervalued, and there is some upside from here." Sunak in his inaugural speech outside Downing Street on Tuesday stressed the importance of "economic stability and confidence" while warning of "difficult decisions to come." Central to the potential stability narrative, as far as U.K. markets are concerned, is the assumption that the central bank will now be less aggressive in raising interest rates.

☆ Bank of England to hike by 75 bps on Nov. 3 but may go bigger
▼ + stars: | 2022-10-25 | by ( Jonathan Cable | ) www.reuters.com time to read: +4 min

Annual price rises were expected to peak at 10.4% this quarter, the poll showed, before gradually declining, but won't fall to target until at least 2025. The median forecast in the Oct. 18-25 poll showed the BoE would take Bank Rate up by 75 bps to 3.00% next week. But while that was a view held by 18 of 30 respondents, 10 expected 100 bps, one said 125 bps and one said 150. It was then expected to add another 75 bps in December and 50 bps next quarter before pausing, meaning rates would peak at 4.25% in the current cycle. Both the European Central Bank and the U.S. Federal Reserve are expected to deliver 75-bps increases at their next meetings.

Average two-year and five-year fixed rates hit 6.65% and 6.51% on Thursday, according to Moneyfacts, the highest since 2008. FALLING PRICESA drop in gilt yields following Rishi Sunak's victory in the Conservative Party leadership race could potentially feed through to lower mortgage rates. But the number of loans available for first-time buyers remains at less than half those on offer before the mini-budget, according to Moneyfacts. NEW FIXESAs well as first-time buyers, brokers are dealing with thousands of people whose fixed rate mortgages are due to expire in the coming months. Redmond, who has had an offer accepted in east London, said it felt as though every turn of political event only made the fixed interest rate higher.

☆ Rishi Sunak set to become UK PM after meeting King Charles
▼ + stars: | 2022-10-25 | by ( Jenni Reid | ) www.cnbc.com time to read: +5 min

Rishi Sunak has been named as the U.K.'s new prime minister and the country's first leader of color. Jeff J Mitchell | Getty Images News | Getty ImagesLONDON — Rishi Sunak will become the U.K.'s third prime minister of the year Tuesday following a meeting with King Charles III. Sunak was elected party leader by fellow Conservative lawmakers on Monday following the resignation of Liz Truss on Thursday. watch nowThe 42-year-old will be the youngest U.K. prime minister since 1812, and the first person of color to lead the country, which U.S. President Joe Biden said Monday was "a groundbreaking milestone." Sunak's parents are of Indian descent and in the 1960s moved from East Africa to the U.K. Sunak also has the greatest personal wealth of any of his predecessors.

☆ Sovereign bond market turmoil to spill well into next year: Reuters poll
▼ + stars: | 2022-10-24 | by ( Hari Kishan | ) www.reuters.com time to read: +4 min

BENGALURU (Reuters) - Turmoil in global sovereign bond markets is set to persist for another six months to a year as central banks carry on raising interest rates to bring down inflation, according to a Reuters poll of market strategists. Since the Fed first moved, bond markets have been subjected to high levels of volatility and deep sell-offs, jolting many bond investors out of their complacency. Bond Market Option Volatility Estimate Index, which began rising late last year, hit its highest level since March 2020 last week. But those median forecasts were higher than in September’s poll, suggesting yields are still facing upside risks. The poll expected bund yields to drop slightly from their current levels to 2.10% by end-2022 and then rise slightly to stay around 2.20% in the following six months.

☆ Bond market remains fundamentally broken despite UK gilts rally, says Jim Bianco
▼ + stars: | 2022-10-24 | by ( Melissa Lee | ) www.cnbc.com time to read: 1 min

In this videoShare Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailBond market remains fundamentally broken despite UK gilts rally, says Jim BiancoJim Bianco of Bianco Research breaks down the market action. With CNBC's Melissa Lee and the Fast Money traders, Guy Adami, Dan Nathan, Karen Finerman and Jeff Mills.

☆ VIEW Rishi Sunak to become Britain's new PM, UK markets rally
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +8 min

LONDON, Oct 24 (Reuters) - Former British finance minister Rishi Sunak will be Britain's next prime minister after his rivals quit the race, which analysts said had relieved some of the nervousness around the outlook for the UK economy, boosting domestic markets. The new Prime Minister needs to confirm their leadership team as soon as possible and provide clarity on their strategy for stabilising the economy and their policy priorities. ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK:"Coming to a very rapid decision on who the prime minister is going be certainly breathes a sigh of relief into the markets. RUTH GREGORY, SENIOR UK ECONOMIST, CAPITAL ECONOMICS, LONDON:"The fall in gilt yields on the news today that Rishi Sunak will become the UK’s next Prime Minister has reduced the chances of a significant fiscal consolidation. With the pound, just because we have a new Prime Minister in place, all of the issues don't just go away and we still have remarkable strength being enjoyed by the dollar."

☆ UK gilts jump as Rishi Sunak emerges victorious in PM race
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 24 (Reuters) - British government bond prices rose sharply on Monday as former finance minister Rishi Sunak cruised to victory in the race to succeed Liz Truss as prime minister, removing at least one source of uncertainty for bond investors. Sunak's rivals, former prime minister Boris Johnson and cabinet minister Penny Mordaunt, dropped out of the Conservative Party leadership race on Sunday and Monday. Gilt jumped briefly on the news that Sunak, a former finance minister, had won the contest. "The fall in gilt yields on the news today that Rishi Sunak will become the UK's next Prime Minister has reduced the chances of a significant fiscal consolidation," said Ruth Gregory, economist at consultancy Capital Economics. The spread between 10-year German and British government bond yields narrowed sharply to 146 bps, after rising above 165 bps on Friday.

☆ Bank of England bond stockpile incurs first loss for UK public finances
▼ + stars: | 2022-10-21 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 21 (Reuters) - The Bank of England's stockpile of government bonds has incurred the first loss for the public finances since the central bank launched its quantitative easing programme in 2009, data showed on Friday. The British Treasury indemnifies the BoE for its bond portfolio which until now has generated profits for the public finances. British banks hold around 950 billion pounds of reserves at the BoE, largely as a result of the 838 billion pounds of QE purchases that the central bank has yet to reverse. The BoE said earlier this year that it had transferred a total of 120 billion pounds to the Treasury in profits from QE since it began buying bonds in 2009. ($1 = 0.8984 pounds)Register now for FREE unlimited access to Reuters.com RegisterWriting by William Schomberg; Editing by Hugh LawsonOur Standards: The Thomson Reuters Trust Principles.

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