📉 UK Inflation Remains Stable, Easing Pressure on BoE!
UK inflation remained weaker than anticipated in January, holding steady at 4% year-on-year, defying forecasts of a rise to 4.1%. This unexpected outcome suggests reduced pressure on the Bank of England (BoE) from underlying price increases. Notably, services inflation reached 6.5%, slightly below the BoE's projections. Despite the stable headline rates, the BoE remains cautious amidst labor market tightness and signs of economic recovery. As a result, traders have adjusted their expectations for rate cuts, now anticipating two cuts for the year, with the first expected in September. However, amidst this cautious sentiment, the UK bond market could emerge as an attractive opportunity. Expected decreases in the Consumer Price Index (CPI) signal potential inflationary relief, supporting the case for Bank of England rate cuts by mid-2024. Furthermore, appealing yields following recent market pullbacks add to the attractiveness of the UK bond market as an investment avenue. It's worth noting that the market does not anticipate a rate cut until the first half of 2024, providing investors with ample time to position themselves strategically. #UKInflation #BankOfEngland #InvestmentOpportunity #BondMarket #EconomicOutlook
UK Inflation Rises Unexpectedly, Tempering Talk of Rate Cuts
UK inflation disappoints at both the headline and core levels: Headline inflation rose to 4.0% in December, above the consensus forecast looking for it to fall from 3.9% to 3.8%. Core inflation, which was also expected to fall, remained unchanged at 5.1%. Source: Bloomberg
UK 20-Year Bond Auction: A Strong Start to 2024!
Today's successful auction of the UK 4.75% 2043 bonds, raising GBP 2.25 billion at a yield of 4.391%, represents a significant rise from the 1.36% yield in the previous auction in October 2021. 📈 Highlighting investor confidence, the auction achieved a strong bid-to-cover ratio of 3.6. Notably, the 20-year UK Gilt has climbed nearly 40bps from its late 2023 low. 🔍 With core inflation trends showing signs of stabilization, market participants are keenly awaiting signals from upcoming wage and inflation data. We are observing keen interest in how the yield curve will react, particularly with the anticipated new 30Y gilt syndication on the horizon. More steepening could be on the cards. 💷 Considering the estimated £76 billion gilt supply for Q1 2024, a key question emerges: Can today's robust auction mitigate the recent selloff, primarily driven by substantial global duration issuance and reassessment of aggressive rate cut expectations? Source: Bloomberg
BREAKING: UK Metro Bank shares plunge 50% as it tries to urgently raise £600m capital
- Metro Bank is seeking to raise up to £600mn after its share price fell almost 50 per cent in recent weeks, said people with knowledge of the plan. The UK challenger bank is in talks with investors about raising £250mn in equity funding and £350mn in debt to shore up its balance sheet, the people said. - The talks came after regulators last month failed to approve a request from Metro to lower the capital requirements attached to its mortgage business. - Bank Crisis - Round II ? Source: FT
Birmingham City Council 2030 bonds yield roughly 2ppts more than UK govt securities as Britain’s second-biggest city in financial dire straits
Source: HolgerZ, Axios Visuals
The UK's second-largest city is bankrupt
Unable to balance its budget as required by law, Birmingham placed itself under the protection of "section 114" on Tuesday. This means that only essential expenditure is covered. The news had all the more resonance because the city council has a million people under its umbrella - the largest local authority in the country, since London is divided into boroughs. And because this failure has raised fears of a domino effect on other struggling English cities.
A nice tweet by Rich Kleinbauer
In February 2020, 70% of private sector employee schemes were allocated to long-term debt (mostly UK Gilts). This investment is down -53% since then, i.e a MINUS 37% contribution to performance...
UK headline inflation cooled sharply in July to an annual 6.8%, but the core consumer price index remained unchanged, posing a potential headache for the Bank of England
The headline CPI reading was in line with a consensus forecast among economists polled by Reuters, and follows the cooler-than-expected 7.9% figure of June. Despite the decline, UK inflation is still the highest among "advanced" economies (see upper chart below). On a monthly basis, the headline CPI decreased by 0.4% versus a consensus forecast of -0.5%. However, core inflation — which excludes volatile energy, food, alcohol and tobacco prices — stayed 6.9%, unchanged from June and slightly above a consensus forecast of 6.8%.
