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☆ Sentiment in UK finance falls at fastest pace since 2019 - survey
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +1 min

LONDON, Oct 13 (Reuters) - Britain needs to restore stability to its finances to help reverse the fastest drop in financial sector sentiment in three years, a survey by business body CBI and consultants PwC said on Thursday. Profitability growth in the sector remains robust and is expected to increase at a faster pace in October to December, the CBI/PwC survey said. But sentiment in the third quarter to September fell at its fastest pace since September 2019, when it was hit by uncertainty around Brexit negotiations, the survey said. Employment in the sector is set to decline at a quicker pace in the current quarter, perhaps a reflection of the weaker sentiment, while the value of souring bank loans is expected to increase modestly, the survey said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Huw Jones Editing by Bernadette BaumOur Standards: The Thomson Reuters Trust Principles.

We think the rebalancing must be done," Bailey said at an event organised by the Institute of International Finance. "My message to the funds involved and all the firms involved managing those funds: You've got three days left now. Bailey was keen to distinguish between the temporary, financial stability nature of the latest intervention and previous quantitative easing stimulus. HEAVY LOSSESInflation-linked gilts, typically held by pension funds and known in the market as linkers, suffered a massive sell-off on Monday as the end to the BoE's programme on Friday approached. Simeon Willis, chief investment officer of pension consultants XPS, said he had seen pension funds selling "across the board" to find liquidity.

☆ U.S. dollar rises, yen not far from 24-year trough that prompted intervention
▼ + stars: | 2022-10-11 | by ( Gertrude Chavez-Dreyfuss | ) www.reuters.com time to read: +4 min

"I can see it propelling the dollar higher still, even though people think it's a crowded trade. Overall, dollar sentiment remained positive as worries about rising interest rates and geopolitical tensions unsettled investors, while the yen hovered near the level that prompted last month's intervention. In afternoon trading, the U.S. dollar index rose 0.2% to 113.25, not far from a 20-year high of 114.78 it touched late last month. The dollar touched a three-week high against the yen of 145.895 , just shy of the 24-year peak of 145.90 hit before the Japanese government stepped in to prop it up three weeks ago. Meanwhile, the risk-sensitive Australian dollar hit a 2-1/2-year low of $0.6248 and was last down 0.4% at US$0.6270.

LONDON, Oct 11 (Reuters) - The U.S. dollar edged back towards September's multi-year highs on Tuesday as worries about rising interest rates and geopolitical tensions unsettled investors, while the yen hovered near the level that prompted last month's intervention. "There are the Fed minutes and U.S. CPI this week that will be quite important for strengthening hawkish Fed expectations and could continue to support the dollar," Pesole added. "It's not that easy to gauge at which level the Bank of Japan will intervene," ING's Pesole said. "It's mostly a matter of how orderly the depreciation in the yen is," Pesole added, although he doubts the BoJ would be comfortable with the yen at 150 per dollar. Adding to the BoE's headaches was labour market data that showed Britain's unemployment rate fall to its lowest since 1974 in the three months to August, but the drop was driven by a record jump in the number of people leaving the labour market.

☆ Dollar gains as geopolitical worries, rate hike fear rattle market
▼ + stars: | 2022-10-11 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

"This renewed wall of worries is likely to keep the dollar supported," he said, but cautioned that there could be a bit of a relief rally in risky assets. U.S. dollar index was up 0.239% at 113.34, inching toward the 20-year high of 114.78 it touched late last month. Fear of intervention has held the yen firm in recent weeks, but as it drifts back to multi-decade lows analysts aren't convinced it can hold the line. The risk-sensitive Australian dollar made a 2-1/2 year low of $0.6275 on Monday and hovered at $0.6267 on Tuesday. Yields on the 30-year bond leapt as much as 11 basis points to the highest in almost nine years at 3.956%.

☆ Dollar gains, yen flirts with intervention levels
▼ + stars: | 2022-10-11 | by ( Ankur Banerjee | ) www.reuters.com time to read: +2 min

Oct 11 (Reuters) - The dollar loomed large over fragile financial markets on Tuesday, with worries about rising interest rates, global growth and geopolitical tensions unsettling investors, while the yen was testing levels that have prompted official intervention. The yen hit 145.80 per dollar overnight, just 10 pips short of the 24-year trough it made before the Japanese government stepped in to prop it up three weeks ago. The risk-sensitive Australian dollar made a 2-1/2 year low of $0.6275 on Monday and hovered at $0.6296 early on Tuesday. "Our expectation for the world economy to enter recession next year is consistent with further gains in the dollar," said Commonwealth Bank of Australia strategist Carol Kong. U.S. dollar index was up 0.053% at 113.12, not far off the 20-year high of 114.78 it touched late last month.

☆ BoE drawn into risky game of financial whac-a-mole
▼ + stars: | 2022-10-11 | by ( Neil Unmack | ) www.reuters.com time to read: +5 min

On Tuesday, the UK central bank said it would buy more bonds to avert a fire sale by pension funds. But its plan to end such support on Friday is hampered by a distressed bond market, and wayward government. Prime Minister Liz Truss’s unfunded plan to cut taxes had triggered a surge in government bond yields, which in turn forced indebted pension funds to sell assets. Register now for FREE unlimited access to Reuters.com RegisterThere are plenty of signs that the bond market remains distressed. Without a credible fiscal strategy, investors may continue to steer clear of UK gilts.

☆ Fire-fighting Bank of England forced to buy inflation-linked bonds
▼ + stars: | 2022-10-11 | by ( Andy Bruce | ) www.reuters.com time to read: +3 min

Citing a "material risk" to financial stability arising from a rout in British government bonds - known as gilts - the BoE said it would buy up to 5 billion pounds ($5.51 billion) of index-linked debt per day, starting Tuesday. Rather than increase the existing commitment to buy up to 10 billion pounds of gilts each day, as announced on Monday, the purchases will run alongside existing purchases of long-dated conventional bonds, now worth up to 5 billion pounds. British inflation-linked gilts - known as linkers - suffered a massive sell-off on Monday, despite the BoE doubling the maximum size of its buy-backs of conventional long-dated gilts. "Dysfunction in this market, and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability." To halt freefalling prices, the BoE was forced to pledge to buy as much as 65 billion pounds ($73.63 billion) of long-dated government bonds, known as gilts.

☆ The Bank of England should extend its emergency bond-buying to manage the volatility that's rocked the country's debt market, UK pensions group says
▼ + stars: | 2022-10-11 | by ( Carla Mozée | ) www.businessinsider.com time to read: +4 min

A UK pensions trade group on Tuesday called on the Bank of England to continue its emergency bond-buying operations to manage volatility in the debt market. The central bank began its bond-market intervention last month as fears of a UK financial crisis risked damaging investments held by pension funds. The BoE is expected to continue purchasing long-dated UK bonds until Friday under its £65 billion intervention aimed at stemming a massive sovereign debt sell-off. The BoE last week said $1 trillion in UK pension funds' investments could have been lost if it didn't intervene with its emergency bond purchases. The group said pension funds over the last couple of weeks have, among other actions, taken steps to strengthen their financial resilience.

☆ Sterling falls for a fifth day; turmoil dogs the bond market
▼ + stars: | 2022-10-11 | by ( Amanda Cooper | ) www.reuters.com time to read: +4 min

LONDON, Oct 11 (Reuters) - The pound fell for a fifth day on Tuesday as the turmoil engulfing UK government bond markets forced the Bank of England to step in yet again to attempt to stem a damaging sell-off in the country's debt. Sterling fell 0.3% to $1.1036, and was also down 0.3% versus the euro at 88.00 pence. If you have a look at the population of holders of long-dated UK assets - anything that is 15-20 years - it's mostly domestic funds," ADM Investor Services Chief Economist Marc Ostwald said. The pound promptly nosedived and the gilts market went into a tailspin, putting pension funds at risk of insolvency. But sterling's problems extend beyond the liquidity crunch in the gilts market.

☆ Morning Bid: British bond burn
▼ + stars: | 2022-10-11 | by ( ) www.reuters.com time to read: +5 min

read moreAhead of the open, 10-year U.S. Treasury yields were again flirting with the year's highs above 4% and global stocks (.MIWD00000PUS) were heading for new 2022 lows. Key developments that should provide more direction to U.S. markets later on Tuesday:* U.S. Sept NFIB small business index. * International Monetary Fund publishes World Economic Outlook and Global Financial Stability Report at annual IMF/World Bank meeting in Washington. * Bank of England Governor Andrew Bailey, BoE deputy governor Jon Cunliffe, Swiss National Bank chief Thomas Jordan, European Central Bank chief economist Philip Lane, ECB board member Fabio Panetta, ECB bank supervisor Andrea Enria speak in United States. Long Gilt Yields SoarRegister now for FREE unlimited access to Reuters.com RegisterBy Mike Dolan, editing by Ed Osmond, <a href="mailto:mike.dolan@thomsonreuters.com" target="_blank">mike.dolan@thomsonreuters.com</a>.

☆ IMF urges UK to align fiscal policy with BoE inflation goals
▼ + stars: | 2022-10-11 | by ( David Milliken | ) www.reuters.com time to read: +2 min

"Fiscal policy should be aligned with monetary policy," Gourinchas said at a news conference in Washington, when asked about Britain's economic situation and the turmoil in its government bond market. "Central banks are trying to tighten monetary policy, and if you have at the same time fiscal authorities that try to stimulate aggregate demand, it's like having a car with two people in the front ... each trying to steer the car in a different direction. "Now what we've seen in the UK market, we've seen market dysfunction, related to some illiquidity in some segments," Gourinchas said. The IMF published new growth forecasts for Britain on Tuesday, although these were finalised before Kwarteng's Sept. 23 statement. The Fund expects British economic growth to slow to 0.3% next year compared with a July forecast of 0.5% growth for 2023.

☆ Morning Bid: Burning bridges
▼ + stars: | 2022-10-11 | by ( ) www.reuters.com time to read: +2 min

A look at the day ahead in European and global markets from Tom WestbrookBarely Tuesday and markets and the world seem to be sweeping unnervingly past points of no easy return. Register now for FREE unlimited access to Reuters.com RegisterNuclear-armed North Korea says it has no interest in talks or dialogue and has fired seven test missiles since Sept. 25, apparently in simulation of the destruction of the south. Meanwhile Britain's attempts at mending fences with markets over fiscal spending plans are faring badly. The Bank of England doubled its bond buying caps as its emergency gilt market support programme nears its end on Friday. Finance minister Kwasi Kwarteng promised to reveal some details of longer-term tax and spending plans at the end of the month.

☆ UK bond market moves are dramatic, confusing, and analysts think it may get worse
▼ + stars: | 2022-10-11 | by ( Elliot Smith | ) www.cnbc.com time to read: +3 min

Monday's sharpest moves were concentrated in the index-linked gilt market — illiquid bonds where payouts to bondholders are benchmarked in line with the U.K. retail price index. The scale of the rise in bond yields — which move inversely to prices — prompted the Bank to expand its emergency bond purchase program on Tuesday to include index-linked gilts until the deadline on Friday. In a statement, the Bank said dysfunction in the index-linked gilt market posed a "material risk to U.K. financial stability." Analysts broadly expect volatility to continue in the coming weeks, at least until Finance Minister Kwasi Kwarteng's make-or-break fiscal policy announcements on Oct. 31. Stuart Cole, head macro economist at brokerage Equiti Capital, said the sequence of announcements from the Bank of England since its initial intervention may suggest that it is starting to "lose control" of the gilt market.

☆ Bank of England warns risks to UK financial stability haven't gone away
▼ + stars: | 2022-10-11 | by ( Mark Thompson | ) edition.cnn.com time to read: +4 min

A slump in UK government bonds that promise to protect investors from inflation — known as index-linked gilts — was the latest source of risk, it said. “Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” it said in a statement. Starting Tuesday, the Bank of England will include index-linked gilts in its emergency £65 billion ($71.7 billion) bond-buying program announced on Sept. 28. The market meltdown began after Prime Minister Liz Truss’ government unveiled £45 billion in unfunded tax cuts on Sept. 23. And with monetary and fiscal policy now working in opposite directions, we think the broader risks around UK monetary [and] financial stability are growing,” he added.

☆ Jamie Dimon says UK government deserves benefit of the doubt after sparking market turmoil
▼ + stars: | 2022-10-11 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +1 min

Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co. says the new U.K. government should be "given the benefit of the doubt." JPMorgan Chase CEO Jamie Dimon said new governments "always have issues" and U.K. Prime Minister Liz Truss should be "given the benefit of the doubt" following a turbulent first month in office. "I would like to see the new prime minister, the new chancellor, be successful," he said. Dimon's comments come after a rocky few weeks for Truss's administration. Sterling plummeted and yields on U.K. government bonds, or "gilts," were sent through the roof and have yet to return to their pre-announcement levels.

☆ Markets won’t go back to normal until the Fed stops hiking rates
▼ + stars: | 2022-10-11 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +8 min

What’s happening: Markets and the Federal Reserve have conflicting temperaments, said Blinder. Markets are capricious while the Fed remains calm. Markets on average, said Blinder, overreact to inflation-related data by a factor of three to 10 times more than they should. The central bank announced Monday that it would provide extra support to UK markets, beefing up its efforts to ensure financial stability, reports my colleague Julia Horowitz. The research is especially relevant today as rapid interest rate hikes to combat inflation have sent markets into turmoil, drawing comparisons to 2008.

☆ BoE should extend bond buying to Oct 31 or "possibly beyond"-pensions trade body
▼ + stars: | 2022-10-11 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 11 (Reuters) - The Bank of England should consider continuing an emergency bond-buying programme aimed at stabilising the market for UK government debt to October 31 "and possibly beyond", the Pensions and Lifetime Savings Association said on Tuesday. "...many feel it should be extended to the next fiscal event on 31 October and possibly beyond, or if purchasing is ended, that additional measures should be put in place to manage market volatility". The BoE on Monday doubled the maximum size of the buybacks and on Tuesday expanded the programme to include inflation-linked gilts, a move welcomed by the PLSA. read more read more"We continue to encourage all pension funds and service providers to use this period to take further steps to rebalance portfolios and ensure necessary measures are in place to protect their strategies in uncertain times," the trade body said. ($1 = 0.9061 pounds)($1 = 0.9057 pounds)Register now for FREE unlimited access to Reuters.com RegisterReporting by Carolyn Cohn, editing by Sinead CruiseOur Standards: The Thomson Reuters Trust Principles.

☆ UK's Kwarteng, seeking to calm markets, brings forward budget date
▼ + stars: | 2022-10-10 | by ( Andy Bruce | ) www.reuters.com time to read: +4 min

Kwarteng said the new date for his medium-term fiscal statement would allow the independent Office For Budget Responsibility (OBR) enough time to assess updates to official data and for a full forecast process to take place. British Chancellor of the Exchequer Kwasi Kwarteng speaks during Britain's Conservative Party's annual conference in Birmingham, Britain, October 3, 2022. Junior Treasury minister Andrew Griffith said market practitioners he had spoken to received news of the new date for the fiscal statement warmly. HALLOWEENThe new date for the fiscal plan leaves Kwarteng and Truss with little more than two weeks to settle divisions in her cabinet over cuts to government spending. Truss was no longer expected to appoint Antonia Romeo to run the Treasury, the FT said, citing senior government figures.

☆ BoE doubles potential bond buy-backs as emergency plan nears end
▼ + stars: | 2022-10-10 | by ( William Schomberg | ) www.reuters.com time to read: +4 min

Although the maximum auction size was raised to 10 billion pounds in Monday's operation the BoE bought only 853 million pounds' worth of debt. read moreThat left its total of bonds acquired since the launch of the emergency programme at less than 6 billion pounds, compared with the 50 billion pound maximum it could have bought. The BoE said in its statement earlier on Monday that it was prepared to deploy unused purchasing capacity in the remaining auctions this week. The BoE also said it would launch a temporary expanded collateral repo facility to help banks ease liquidity pressures facing client funds caught up in the turmoil, which threatened pension funds. The sharp sell-off in British government bonds after Kwarteng's "mini-budget" sparked a scramble for cash by Britain's pension funds which had to post emergency collateral in LDIs.

☆ BoE’s insurance policy raises question of next act
▼ + stars: | 2022-10-10 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 10 (Reuters Breakingviews) - The Bank of England is taking out insurance against a market meltdown. On Monday, the central bank said it was ready to double the daily limit of its bond-buying programme from 5 billion pounds to 10 billion pounds. This will cost users just 15 basis points above the base rate, although they face haircuts of up to 42%. (By Aimee Donnellan)Register now for FREE unlimited access to Reuters.com RegisterFollow @Breakingviews on Twitter(The author is a Reuters Breakingviews columnist. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Bank of England still trying to put out fire Liz Truss started
▼ + stars: | 2022-10-10 | by ( Julia Horowitz | ) edition.cnn.com time to read: +2 min

The central bank said it would accept a wider range of assets as collateral in exchange for cash. The yields on long-dated government bonds, which move opposite prices, fell sharply after the Bank of England announced its initial action in late September. The central bank has said that it was forced to act to prevent a “self-reinforcing spiral” after the market experienced historic selling in the wake of the budget plans revealed by Finance Minister Kwasi Kwarteng and Prime Minister Liz Truss. Pension funds — which have been particularly exposed to the tumult — have been forced to sell whatever assets they can to replenish depleted cash stocks. To date, the Bank of England has scooped up just £5 billion in debt when it could have purchased £40 billion, it said Monday.

☆ UK brings budget forward in another attempt to reassure markets
▼ + stars: | 2022-10-10 | by ( Hanna Ziady | ) edition.cnn.com time to read: +3 min

Kwarteng announced the Oct. 31 date in a letter to the Treasury on Monday, pulling his midterm budget forward by more than three weeks in an attempt to reassure rattled markets and rebellious party colleagues. He also confirmed that the Office for Budget Responsibility (OBR), the independent fiscal watchdog, will publish its assessment of the budget on the same day. Investors have been awaiting clarity on a revised date for the budget, which was initially set for November 23. It was widely expected to be brought forward after Kwarteng’s “mini” budget on Sept. 23 crashed the pound and sent shockwaves through financial markets with its promise of £45 billion ($49.8 billion) of unfunded tax cuts. The pound has recovered all of its losses but UK government bond yields remain higher than they were before the crash.

☆ UK mortgage rates are soaring: Here's what you need to know as a first-time buyer
▼ + stars: | 2022-10-10 | by ( Sophie Kiderlin | ) www.cnbc.com time to read: +4 min

Uncertainty around the U.K. housing and mortgage market has spread among first-time buyers. Unfortunately, a number of other factors are simultaneously making their lives harder: namely, inflation, interest rates and mortgage market disruption," he told CNBC Make It. However, what they have saved on SDLT [stamp duty] will likely be eaten up on higher mortgage rates pretty quickly," he said. So, what about mortgage rates? This could go up even further, Nicholas Mendes, a technical mortgage manager at mortgage broker and advisor John Charcol, believes.

☆ UK needs 62 billion pounds of cuts or tax rises to tame debt - IFS
▼ + stars: | 2022-10-10 | by ( David Milliken | ) www.reuters.com time to read: +4 min

Interest rates for new long-term government borrowing leapt to a 20-year high last month, after Kwarteng announced 45 billion pounds of unfunded tax cuts, on top of even greater short-term support for households' and businesses' energy bills. "The Chancellor should not rely on over-optimistic growth forecasts or promises of unspecified spending cuts. British government borrowing looks on course to hit 194 billion pounds this financial year and to still be 103 billion pounds in 2026/27 - 71 billion more than government forecasters predicted in March, the IFS said. COSTLY DEBTDebt interest would cost 106 billion pounds this year and 103 billion pounds in 2023/24, the IFS predicted, due to the large amount of finance raised in years gone by through issuing bonds that pay interest that rises as inflation goes up. "Such spending cuts could be done, but would be far from easy," the IFS said.

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