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UK bonds and pound hit as Bank of England denies it will delay bond sales – business live | Business

Bank of England: Report of decision to delay bond sales is inaccurate

Newsflash: The Bank of England says the report it plans to delay the sale of some of its UK government bonds is ‘inaccurate’, which has knocked bond prices lower.

As we covered earlier, the Financial Times reported that the Bank was expected to delay the sale of bonds bought through its quantitative easing (QE) stimulus programme, because gilts markets were “very distressed”.

But in a brief statement, a spokesperson for the central bank said.

“This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate,”

Well..a fairly concise statement from Bank of England on reports it was going to delay bond selling. “This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate.”
What will markets make of that?!

— Ashley Armstrong (@AArmstrong_says) October 18, 2022

Bond traders have responded by selling gilts, which is pushing up the yield (or interest rate) on short and long-dated bonds, which measures the cost of UK borrowing.

The 30-year bond yield, for example, is now up 5 basis points at 4.42%, having dropped as low as 4.32% this morning.

BANK OF ENGLAND SAYS FT REPORT OF POSSIBLE DELAY TO START OF QUANTITATIVE TIGHTENING BOND-SELLING PROGRAMME IS INACCURATE

That’s torn it, gilts offered on this

— Neil Wilson (@marketsneil) October 18, 2022

This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate,” Bank of England spokesperson says in emailed statement.

Gilts becoming the most difficult market to trade….

— Mario Cavaggioni (@CavaggioniMario) October 18, 2022

Key events

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Bank of England: Risk of another fire-sale in gilts significantly reduced – Reuters

The risk of a fresh ‘fire sale’ breaking out in the UK government debt market has been significantly reduced, the Bank of England says.

In a letter to parliament’s Treasury Committee, deputy BoE governor Jon Cunliffe says that liability-driven investment funds were now better prepared to manage shocks like the one triggered by September’s mini-budget

Cunliffe writes:

“Taken as a whole, LDI funds are now significantly better prepared to manage shocks of this nature in the future,”

“As such, the risk of LDI fund behaviour triggering ‘fire sale’ dynamics in the gilt market and self-reinforcing falls in gilt prices has been significantly reduced.”

⚠️ BANK OF ENGLAND: , THE RISK OF LDI FUND BEHAVIOUR TRIGGERING ‘FIRE SALE’ DYNAMICS IN THE GILT MARKET AND SELF-REINFORCING FALLS IN GILT PRICESHAS BEEN SIGNIFICANTLY REDUCED.

– Reuters via https://t.co/ymHY6x4lOb

— PiQ  (@PriapusIQ) October 18, 2022

Sky News reported yesterday that Britain’s financial regulators had identified one remaining fund at an asset manager which would have faced a series of “knockouts” yesterday if yields had jumped. In the event, yields fell as Jeremy Hunt scrapped much of the mini-budget.

On Wall Street, Goldman Sachs is reorganising parts of its business after a drop in earnings.

As had been rumoured, Goldman is to fold its trading and investment banking business into one unit.

This will shrink the bank from four to three divisions; asset and wealth management, global banking and markets and platform solutions.

Goldman also reported earnings per share of $8.25 for the third quarter of 2022, better than forecasts, but down on the $14.93/share a year ago when markets and dealmaking was more buoyant.

Goldman says it “continued to support clients amid a challenging macroeconomic environment”

UK mortgage costs are continuing to climb, even after Chancellor Jeremy Hunt scrapped most of the mini-budget in an attempt to reverse the loss of credibility that drove up borrowing costs.

Bloomberg explains why:

The average two-year fixed-rate home loan jumped to 6.53% on Tuesday, rising further above the 14-year high reached last week, according to Moneyfacts Group Plc. The average five-year fixed-rate deal climbed to 6.36% after breaching 6% for the first time since 2008 a fortnight ago.

On Monday, Hunt reversed almost all of the tax cuts and giveaways that were announced by his predecessor Kwasi Kwarteng in September. The move prompted a surge in UK government bonds, but it will take several days for banks to factor the corresponding fall in yields into the mortgage prices they offer.

Facebook owner Meta ordered to sell Giphy

Photograph: Rafael Henrique/SOPA Images/REX/Shutterstock

After a long battle, Facebook parent company Meta is being forced to sell the gif creation website Giphy by the UK’s competition watchdog.

The Competition and Markets Authority has made its final decision, after finding that the deal could allow Meta to limit other social media platforms’ access to GIFs, and would also remove Giphy as a potential challenger in the UK display advertising market.

It’s the first time the regulator has moved to block a deal struck by one of the Silicon Valley giants.

The CMA first ruled in August 2021 that the takeover could harm competition, and ordered a sale in November.

Meta appealed that decision to the Competition Appeal Tribunal (CAT), prompting the CMA to reconsider its decision after CAT found in Meta’s favour on one of six points.

But having looked at new third-party evidence and fresh submissions from Meta and Giphy, the CMA concluded Meta would be able to increase its already significant market power by:

  • denying or limiting other social media platforms’ access to Giphy GIFs, thereby pushing people to Meta-owned sites, which already make up 73% of user time spent on social media in the UK, or

  • changing the terms of access – for example, it could require Giphy customers, such as TikTok, Twitter and Snapchat, to provide more data from UK users in order to access Giphy GIFs

Meta says it’s disappointed, but accepts the ruling.

Mark Sweney

Mark Sweney

Barrels of beer
Photograph: Justin Tallis/AFP/Getty Images

The prospect of a UK beer shortage looms as drivers and workers at a firm that makes about 40% of deliveries to UK pubs and clubs are to stage five days of strike action over pay and job cuts.

About 1,000 drivers and dray workers – a person who delivers beer for a brewery – at GXO Logistics are set to stage a first round of strikes between 31 October and 4 November at depots across the UK.

The union Unite said the strike will “impede the ability of pubs and other venues to replenish their cellars prior to the World Cup”, with more action planned for closer to kick-off on 20 November if the dispute is not resolved.

Unite said the strikes would impact pubs and venues supplied by big brewers including Heineken, Stonegate, Admiral Taverns and Shepherd Neame.

GXO Logistics makes deliveries to about 4,500 pubs in London and the south-east and has a network of 22 depots from Inverness to Southampton where rolling strike action will take place.

A ban on overtime working will come into force from 24 October.

Here’s the full story:

Headteachers to be balloted on industrial action

Back in Brighton, TUC general secretary Frances O’Grady has called for a general election amid the continuing political turmoil.

Addressing her final TUC Congress before stepping down, she said:

“Some say Liz Truss must go. I think they’re wrong.

“This whole rotten Tory Government must go. The Tories are toxic. It’s time for change.

“We need a general election now.”

O’Grady told delegates that the real wealth creators are the “people of this country,” not the hedge funds who profited from betting against the pound as it fell to a record low last month

.@FrancesOGrady kicks off the TUC congress by hitting out at Liz Truss:

“The prime minister believes that Britains poor productivity is down to the poor performance of workers
….
She didn’t even turn up for work yesterday” pic.twitter.com/x7LodD0CB6

— Evie Breese (@EvieBreese) October 18, 2022

The TUC have also heard that the NAHT headteachers’ union will ballot its members on whether they want to go on strike over pay for the first time.

NAHT leader Paul Whiteman said his union, which has around 35,000 members mostly in primary schools, will ask its membership in England if they want to take industrial action over pay and funding.

The NAHT’s first ballot over pay in its 125-year history will ask members if they want to take action short of strike action, and whether they will take strike action:

Whiteman says:

“Over the course of the last few months, I have travelled the country hearing from our members directly. I have never heard more anger and despair.

“School leaders across the country are telling me that they cannot continue to run their schools in the current circumstances. The neglect of pay in education and the funding to support it is now eroding the quality of education that our members can provide.

Headteachers will – for the first time- be balloted for strike action by @NAHTnews in an unprecedented move, announced at congress by gen sec @PaulWhiteman6

This means @NASUWT , @NEUnion and NAHT will all be balloting teachers to strike at the same time. Wow

— Evie Breese (@EvieBreese) October 18, 2022

Two-year UK government bonds have also dropped after the Bank of England denied deciding to pause debt sales.

The yield on two-year gilts has now risen to 3.65%, up 6 basis points.

That’s a modest move by recent standards, but not the direction the Treasury wants to see, as it reverses some of Monday’s rally.

As Bloomberg explains:

With the BOE saying a Financial Times report it would push back sales was inaccurate, traders are worrying about a deluge of sovereign issuance from both the central bank and government.

Over in Germany, investor sentiment remains very weak as Europe’s largest economy falls closer to recession in the energy crisis.

The ZEW economic research institute’s economic sentiment index grew slightly in October, to -59.2, from -61.9 in September, slightly better than expected, but still very low.

ZEW’s index of current conditions deterioratated further down by 11.7 points in October to a reading of -72.2.

ZEW President Achim Wambach, said the economic outlook has deteriorated again, warning:

“The probability that real gross domestic product will decline in the course of the next six months has also increased considerably.”

Highly volatile German ZEW Index in October slightly better than expected:
– 59.2 (est -66.5, last -61.9)
– expectations -59.7 (last -60.7)

That said, outlook is everything but encouraging for German economy pic.twitter.com/ir4oMWMd3i

— Mario Cavaggioni (@CavaggioniMario) October 18, 2022

Here’s how the pound reacted:

The Bank of England don’t actually specify what’s ‘inaccurate’ in the FT’s report that they’re set to delay the sale of billions of pounds of government bonds.

The sale was due to start at the end of the month, having been delayed from early October.

So there’s still almost a fortnight before Bank governor Andrew Bailey actually presses the QT button to start gilt sales. So he could still delay, even if that decision hasn’t been taken yet.

And the FT story says that the Bank is “now expected to bow to investor pressure for a further pause until the market becomes calmer”, not that it has bowed.

Reuters’ Andy Bruce dubs this morning’s statement a ‘non-denial denial’, as the BoE isn’t categorically saying that the sales won’t be delayed again.

Bank of England:
“This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate.”

Collectors item for lovers of non-denial denials?

— Andy Bruce (@BruceReuters) October 18, 2022

The pound has taken a knock too – down half a cent at $1.1305.

Bank of England: Report of decision to delay bond sales is inaccurate

Newsflash: The Bank of England says the report it plans to delay the sale of some of its UK government bonds is ‘inaccurate’, which has knocked bond prices lower.

As we covered earlier, the Financial Times reported that the Bank was expected to delay the sale of bonds bought through its quantitative easing (QE) stimulus programme, because gilts markets were “very distressed”.

But in a brief statement, a spokesperson for the central bank said.

“This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate,”

Well..a fairly concise statement from Bank of England on reports it was going to delay bond selling. “This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate.”
What will markets make of that?!

— Ashley Armstrong (@AArmstrong_says) October 18, 2022

Bond traders have responded by selling gilts, which is pushing up the yield (or interest rate) on short and long-dated bonds, which measures the cost of UK borrowing.

The 30-year bond yield, for example, is now up 5 basis points at 4.42%, having dropped as low as 4.32% this morning.

BANK OF ENGLAND SAYS FT REPORT OF POSSIBLE DELAY TO START OF QUANTITATIVE TIGHTENING BOND-SELLING PROGRAMME IS INACCURATE

That’s torn it, gilts offered on this

— Neil Wilson (@marketsneil) October 18, 2022

This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate,” Bank of England spokesperson says in emailed statement.

Gilts becoming the most difficult market to trade….

— Mario Cavaggioni (@CavaggioniMario) October 18, 2022

Ryanair boss O’Leary blames Brexit for UK economic ‘car crash’

Ryanair boss Michael O’Leary has described the current economic situation in Britain as a “car crash” which he blamed on the country’s decision to vote to leave the European Union in 2016, Reuters reports.

O’Leary told a news conference in Rome that Britain needs a sensible trading agreement with the EU, saying

“The mini budget was a kind of spectacular failure of the whole concept of Brexit.”

O’Leary welcomed the appointment of Jeremy Hunt as chancellor, and the economic u-turn announced yesterday:

“The Remainers are coming back, the adults are taking charge again .. we will return to some sensible economic policies.”

He said he expected Truss to be out of office within a week or two, as she was now “in office but not in power”.

The UK’s armed forces minister, James Heappey, has shown the challenge Jeremy Hunt will face in cutting spending, by suggesting he would quit if the defence budget wasn’t increased as promised.

Speaking on Tuesday, Heappey said the government still intended to spend 3% of GDP on defence by 2030, as pledged by Liz Truss before she became leader

Asked if he would quit if that changed, he told LBC:

“Yes. But no one has said that 3% is not going to happen by 2030 … we need to be spending 3% of our GDP on defence of our nation by 2030 because there is no prosperity without security.”

Heappey also told Sky News:

“The commitment the prime minister made is 3% by 2030 and to be clear like the secretary of state [for defence, Ben Wallace] that’s something that I believe must be delivered given the need to keep our nation safe given increasingly uncertain times.”

Here’s the full story, by my colleague Jessica Elgot:

Pantheon Economics have warned that chancellor Jeremy Hunt needs to find at least £39bn of additional savings, to get debt falling as a share of the economy in the medium term.

It says:

  • The new Chancellor’s quick actions have reduced the outlook for public borrowing in 2025/26 by £35B…

  • …But he needs to find at least £39B more savings to ensure the debt-to-GDP ratio is falling in three years’ time.

Pantheon also estimate that CPI inflation increased to 10.1% in September, from 9.9% in August. The data is due tomorrow morning.

“The Chancellor has picked the low-hanging fruit; further cuts will hurt”

Pantheon Macroeconomics says the government still needs at least another £39bn of savings to ensure debt is falling as a % of the economy in 3 years time

That on top of the £35bn from Jeremy Hunt so far

— Scott Beasley (@SkyScottBeasley) October 18, 2022

The demands on the NHS, the increase in pensioners, rising debt costs and the Ukraine war all means that the government can’t cut the size of the state easily, or possibly at all.

Former Conservative leader William Hague makes this case in The Times today, explaining how the Trussomic notion that tax cuts would spark a resurgence of growth was dead and buried:

Enthusiasts for Truss’s original idea will argue that the crashing of it was down to poor driving skills — adding in an unpopular reduction in the top rate of tax and neglecting to accompany the measures with official forecasts ruined everything else. While that is partly true, the decisive problem was that Truss and Kwarteng were driving at a brick wall: the immense difficulty of reducing the size of the state in the present day. This is not the 1980s, when Tories could benefit from unloading nationalised industries and mass council housing, while being cushioned by North Sea oil and eventually a peace dividend as the Cold War ended.

In the 2020s, we have a health service with seven million people on its post-lockdown waiting lists, a larger than ever pensioner population who demand triple-lock increases, debt interest soaring and defence spending necessarily rising as a war on our own continent intensifies. Even if every sinew is strained to reduce other expenditure, those four items alone mean there will be no smaller state in the foreseeable future.

Having tested to destruction the idea that a low-tax revolution can allow a breakout from that reality, Conservatives will now need to turn to new ideas for the future. That may be no bad thing.

Hague is right, obviously. There are no easy or sensible ways to reduce the size of the state. People simplistically arguing from spending/GDP ratios surely understood it. Depressing that it’s so rare to see this pointed out so clearly. https://t.co/uQhhdnT7UG pic.twitter.com/7JmeY65XgD

— Giles Wilkes (@Gilesyb) October 18, 2022

But Hague adds that it will be just as hard for Labour to grow the state, without large tax increases for the general population. The task is harder as the Conservatives keep lifting more of their fiscal policies (they’ve already filched the shorter energy bill freeze, and one energy windfall tax earlier this year).

More here: William Hague: Ideology is dead: it’s competence we need now



https://www.theguardian.com/business/live/2022/oct/18/uk-workers-tuc-living-standards-spending-ftse-pound-bonds-bank-of-england-business-live UK bonds and pound hit as Bank of England denies it will delay bond sales – business live | Business

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