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"The latest round of China reopening hopes have helped drive us higher here again," he told clients. Any change to that scenario may be a positive impulse for cyclical stocks, it said, but it adds to the inflation headache for central banks. "The somewhat negative implication of stronger China growth is that it would likely add to global inflationary pressure. "We suspect Chinese re-opening (will) imply upside risks to commodity prices and global rates." But even with a G20 summit due next week, global cooperation has been in short supply in fractious 2022.

The net effect was to catapult next year's implied Fed terminal rate well above 5%. Fed vs BoE Terminal RatesNIESR chart on UK variable mortgagesBANK "IN A HOLE"Although the BoE insisted further hikes from 3% would likely be needed, two of the nine person policymaking council voted for a smaller rate rise this week. State Street's EMEA macro strategist Tim Graf also thinks a terminal rate closer to 4% is now "the more likely end state for policy rates." The BoE needs to be super careful about the pound because another withering lurch will simply aggravate import and energy price inflation. by Mike Dolan, Twitter: @reutersMikeD; Editing by Josie KaoOur Standards: The Thomson Reuters Trust Principles.

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.

A down shift in the rate hiking pace by the Bank of Canada this week just stoked that speculation. And even in the face of some spooky corporate health warnings, stock markets fed off Fed 'pivot' talk yet again and have been chomping at the bit for a fortnight. When that 2-10 yield curve inverted in April for the first time in almost three years - shortly after the Fed's first hike - recession angst took a firm grip. Fed economists argued vociferously that the 2-10 yield curve was not reliable and insisted a 'soft landing' was still possible if more accurate shorter-term yield curve spreads that remained positive were used instead. An elongated measure of the yield curve between 3 months and 10 years - used by the New York Fed in its recession probability models - dropped into negative territory for the first time since the pandemic hit.

The stakes are high as it potentially affects the future use and effectiveness of extraordinary monetary policies such as bond-buying 'quantitative easing' (QE) and questions the wider political independence of central bank policymaking. The European Central Bank, Bank of England and U.S. Federal Reserve are all - to differing degrees - now facing a backwash from years of policy-driven but lucrative balance sheet expansion. As they lift interest rates, that balance sheet burns a hole in their pockets - or more particularly the pockets of their governments long used to windfalls coming the other way. That will surely climb as the BoE is expected to at least double its policy rate, the rate paid on bank reserves, by May. G4 central bank balance sheetsThe easy-money era is overReuters Graphics Reuters GraphicsThe opinions expressed here are those of the author, a columnist for Reuters.

But Broadbent's concentration on the likely peak terminal rate next year is what matters most. For context, that UK terminal rate, now pencilled in for around the middle of 2023, rocketed almost two full percentage points from just prior to the botched mini-budget to as high as 6.25%. Fed terminal rates, now targeted about March next year, have jumped 150 bps to 5% over the past two months. And Morgan Stanley, for example, see a UK terminal rate as low as 4% - a huge drop from current market pricing. The stubborn refusal of terminal rate pricing to return to where it was last month reflects the extent of those jitters.

Societe Generale's contrarian strategist Albert Edwards said Britain's reawakening of the fabled 'bond vigilantes' would "reverberate around financial markets for years to come." And many read across to ebbing liquidity in U.S. Treasury markets for a take on Fed parameters this time around too. Bank of America's October survey of global fund managers, released on Tuesday, certainly backs that up. Register now for FREE unlimited access to Reuters.com Registerby Mike Dolan, Twitter: @reutersMikeD. Charts by Bank of America, Vincent Flasseur and Lewis Krauskopf; Editing by Josie KaoOur Standards: The Thomson Reuters Trust Principles.

Their joint communique released by the U.S. Treasury late on Wednesday did give Japan something - but it was thin gruel. read more"Recognizing that many currencies have moved significantly this year with increased volatility, we reaffirm our exchange rate commitments as elaborated in May 2017," the G7 wrote. And, for the record, the 2017 phraseology was that excess volatility and disorderly currency moves have negative impacts on their economies and financial stability. read more"We cannot tolerate excessive volatility in the currency market driven by speculative moves," he opined after. The big question is whether this dollar surge is in fact a "short run" aberration or whether it is a more permanent feature of the global landscape.

And futures now assume the inflation fight will fall solely on the BoE and expect it to triple policy rates to as high as 5.8-6% next year. On Tuesday, the independent Institute for Fiscal Studies said Kwarteng needed 62 billion pounds ($68.22 billion) of spending cuts to keep public debt sustainable over time, with borrowing this year on course for 194 billion pounds and still above 100 billion by 2026/27 - over 70 billion higher than OBR forecasts in March. QE involves the purchase of mostly gilts from commercial banks in return for interest-bearing reserves at the central bank. And, unlike other major central banks, the BoE policy rate itself is the rate paid on those bank reserves. NIESR last year urged a solution to the problem whereby Treasury and central bank reduced the maturity mismatch by swapping longer-dated gilts back to Treasury to cut duration of its portfolios.

There were two main elements to the blowup in so-called Liability Driven Investment (LDI) strategies for British pension funds over the end of the third quarter. And yet it's private credit - ranging from direct corporate lending vehicles to leveraged loans - where arguably least is known. The rising rate environment alone has made some wonder how resilient private credit strategies given they don't have to mark to market regularly. To cope with illiquidity, the survey showed investors increasingly pairing private credit allocations with cash or more liquid core fixed income instruments. The boom in private credit assets has been spectacular - but booms don't last forever and shocks like the ones we've seen in recent weeks are at least a shot across the bow.

At the International Monetary Fund's last count in the first quarter of this year, almost 5% of the world's foreign currency reserves were denominated in sterling - a total of $625 billion dollars worth of sterling and sterling assets on a crude calculation from the $12.55 trillion total. The UK has a reserve currency so it can always issue debt – it's just a question of the right price." But what if that reserve currency position is threatened and foreign central banks balk at holding so much sterling in their national savings stashes? Seven of the world's top 10 reserve holding central banks are in Asia or the Middle East. UBS chart on its 2022 survey of world reserve managersThe opinions expressed here are those of the author, a columnist for Reuters.

☆ Wall Street's most highly regarded titans are warning 'the worst is yet to come' for stocks. Here's why people like Ray Dalio, Jeremy Grantham, Carl Icahn, and Scott Minerd are bearish on the market's
▼ + stars: | 2022-09-24 | by ( William Edwards | ) www.businessinsider.com time to read: +5 min

Ray Dalio, Carl Icahn, Scott Minerd, and Jeremy Grantham all warned in recent days of more downside. In recent days, a number of them — including Ray Dalio, Jeremy Grantham, Scott Minerd, and Carl Icahn — have warned that further downside is coming. Ray Dalio, founder of Bridgewater AssociatesRay Dalio at the MarketWatch Best New Ideas in Money Festival in New York on September 21, 2022. Carl Icahn, founder of Icahn Enterprisesvia CNBCIcahn also pointed out this week that it's a generally bad environment for economic growth and investors with the Fed tightening, which he supports. "I think it's going to be worse before it gets better," Icahn said at the MarketWatch Best New Ideas in Money Festival on Wednesday.

Whacked further by a soaring dollar, indices of overseas sovereign bonds in dollar terms are down almost 24% - even worse than then S&P500's (.SPX) 19% year-to-date reversal. Far from portfolio buffers, these sorts of moves make bonds meat and drink for hedge funds. And even though equity prices have fallen and cheapened on many models, their relative value versus bonds has not. It trimmed expected equity returns by a quarter point. Reuters poll-U.S. treasury yield outlookRobeco Chart on Asset Allocation HistoryThe opinions expressed here are those of the author, a columnist for Reuters.

☆ The wealthy elite who gather in Davos to talk about saving the planet always ignore the best solution: paying more taxes
▼ + stars: | 2022-03-05 | by ( Paul Constant | ) www.businessinsider.com time to read: +5 min

He spoke with Peter Goodman about his new book and the World Economic Forum meeting in Davos. Goodman says Davos has become a feel-good event for billionaires who refuse to make real change. But Davos's most noteworthy topics are the ones that don't typically get discussed: For instance, historian Rutger Bregman made waves in 2019 when he told the affluent audience at Davos that they were ignoring the solution that mattered most: "Taxes, taxes, taxes. The solutions to the very real problems discussed at Davos every year are relatively simple, but they'll never be welcomed by the Davos audience. The only people who aren't ready to hear about that solution, unfortunately, are the people who gather at Davos every year.

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