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As Truss spoke on Friday gains made in anticipation of the corporation tax U-turn faded. Ten-year gilt yields were 40 bps above session lows hit earlier on Friday, also pushed up by moves in bond yields globally. UNDERWHELMEDBritain's mini-budget three weeks ago triggered some of the biggest ever jumps in British bond yields, exposed vulnerabilities in the pensions sector -- undermining the country's financial stability. "How it impacts liquidity on the gilt market going forward is something we are monitoring closely." Rabobank's McGuire said pressure on UK assets could lead the BoE to re-intervene in the bond market or delay its quantitative tightening, bond-selling plans.

☆ Reactions: UK's Truss fires Kwarteng, set to U-turn on tax cuts
▼ + stars: | 2022-10-14 | by ( ) www.reuters.com time to read: +5 min

LONDON, Oct 14 (Reuters) - British Prime Minister Liz Truss fired her finance minister Kwasi Kwarteng and news reports said she will scrap later on Friday parts of the economic programme of big, unfunded tax cuts that they delivered last month. Consequently, the scope for a rally in gilts (move lower in yields) and sterling would seem to be limited." BENJAMIN NABARRO, ECONOMIST, CITI"The key issue in the near term is the contradiction between monetary and fiscal policy. RACHEL REEVES, OPPOSITION LABOUR PARTY'S FINANCE CHIEF"This humiliating u-turn is necessary - but the real damage has already been done. We may well be through the worst of the volatility but I fear that the UK is nowhere near out of the woods."

But it is unclear how many lenders are tapping the facility and whether pension funds are willing to shell out additional fees for what is a temporary solution, sources told Reuters. Banks are reluctant to increase their lending to LDI funds through the repo facility, according to one official at a European bank. BRIDGING THE GAPLDI is an investment strategy sold by asset managers like BlackRock, Legal & General Investment Management and Insight Investment to pension schemes to help them match their assets and liabilities. Governor Andrew Bailey has rejected calls to continue buying bonds from pension funds which say they still need support beyond Friday. "It's a bridging tool that they can still use to keep the dialogue with the market and the pension funds going."

☆ China's smaller banks cut deposit rates to ease margin pressure
▼ + stars: | 2022-09-29 | by ( ) www.reuters.com time to read: +4 min

Several Chinese city commercial banks and rural commercial lenders have cut their rates on a range of deposits this week, according to statements released on the banks' websites. The smaller lenders followed in the footsteps of some of China's biggest state-owned banks, which implemented rate cuts earlier this month. Peiqian Liu, China economist at Natwest Markets, noted the commercial banks' deposit rate cuts are part of the monetary policy transmission mechanism after the central bank cut key policy rates in August. "This rate cut by commercial banks will help improve the profit margin slightly and is technically opening up more space for further (benchmark lending) rate cuts." Four of the five of China’s largest banks, except for Bank of China, reported falling net interest margins (NIMs) in the second quarter.

☆ Markets are now treating UK bonds like Greek and Italian debt
▼ + stars: | 2022-09-27 | by ( Julia Horowitz | ) edition.cnn.com time to read: +6 min

The price of benchmark 10-year UK government bonds also increased slightly. “This is a situation where government borrowing costs — and therefore all our borrowing costs — are incredibly vulnerable,” economist Mohamed El-Erian, an adviser to Allianz, told the BBC on Tuesday. It will drive up import costs, adding to pressure on the Bank of England to hike interest rates faster and higher. Previously, markets were absorbing about £100 billion ($108 billion) in UK bonds annually, according to Ross Walker, chief UK economist at NatWest Markets. Yet higher borrowing costs will have consequences for both the government and households.

☆ Stocks could struggle as investors read the Fed's message to mean a recession is more likely
▼ + stars: | 2022-09-22 | by ( Patti Domm | In | ) www.cnbc.com time to read: +5 min

Lerner said investors should also realize that higher rates in the bond market could pressure stocks as investors look for attractive yield elsewhere. Sam Stovall, chief investment strategist at CFRA, said the more hawkish Fed does not mean the market will keep from rallying in the fourth quarter. The fourth quarter in a mid-term election year is often positive, after stocks crater in September and early October in the typical seasonal pattern. Stovall said he is less enthusiastic about a fourth quarter rally, but it could still happen. "I'm not giving up on a fourth quarter rally, but it might start with a lower case 'r'," he said.

☆ There's one number that could be key to how markets trade right after the Fed meets
▼ + stars: | 2022-09-21 | by ( Patti Domm | In | ) www.cnbc.com time to read: +6 min

(A basis point equals 0.01 of a percent) Besides the rate hike, the market is intently focused on the terminal rate. Expectations for the Fed's terminal rate also soared. Before the August CPI report, the futures market was pricing in a terminal rate at just about 4% for next April. In the futures market, "the terminal rate went up 40 basis points in 24 hours," he said. But NatWest Markets expects the Fed could indeed have a terminal rate of 5%.

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