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 Weekly Bulletin 30 (30 Jul 2007) |
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The debt markets continued their rally last week as the implications of the collapse of the US sub prime market started to produce a reaction which, in some areas, was not far short of panic. The results were impressive; the USD staged a major rally, the FTSE 100 saw its biggest one day fall in four years and several major transactions were put on hold as the syndicated debt market collapsed. The US housing market would appear, at first glance, to be producing a reaction in other markets... |
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| Weekly Bulletin 29 (23 Jul 2007) |
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The worsening of the sub prime lending market and various projections that it will become worse was sufficient for the US market to set off on a reasonable rally last week. This, in turn, exported itself to other major currencies with the result that UK rates fell by up to 0.10% despite having to absorb a range of economic data that was hardly likely to deter the MPC from continuing to tighten monetary policy. The only note of optimism for the doves was that Charlie Bean, the Bank of England’s Chief Economist, voted against this month’s rate hike. Setting monetary policy... |
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| Weekly Bulletin 28 (16 Jul 2007) |
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The debt markets tried to stage a rally in the middle of last week with term rates, at one point, a good 0.10% lower than at the start of the week. However, it did not last very long and by the end of the week all the gains had been lost. The rally had been driven by the US where ongoing horror stories over the potential impact of the collapse in the sub prime mortgage market, combined with little sign of any recovery in the US housing market, have been spooking the markets on a variety of fronts. The most obvious reaction to the threat, or fear, of a credit crunch... |
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| Weekly Bulletin 27 (09 Jul 2007) |
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As had been fully expected by almost everybody, the MPC duly decided to raise interest rates by a further 0.25% to 5.75% at their meeting last Thursday and this had no impact on the market. The fact that period rates subsequently rose to end the week at new highs was more down to a resurrection of concern over inflationary pressures in the US rather than any domestic consideration. While UK rates were more driven by global considerations than domestic news, there... |
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| Weekly Bulletin 27 (09 Jul 2007) |
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As had been fully expected by almost everybody, the MPC duly decided to raise interest rates by a further 0.25% to 5.75% at their meeting last Thursday and this had no impact on the market. The fact that period rates subsequently rose to end the week at new highs was more down to a resurrection of concern over inflationary pressures in the US rather than any domestic consideration. While UK rates were more driven by global considerations than domestic news, there... |
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| Weekly Bulletin 26 (02 Jul 2007) |
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While the UK debt market remains very volatile, there have been signs over the past two weeks that it has reached a level where there is some resistance to term rates moving ever higher. This week sees period rates start the week at levels very similar to a week ago. Last week saw the long awaited replacement of Tony Blair by Gordon Brown as Prime Minister and the appointment of Alistair Darling as the new Chancellor... |
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| Weekly Bulletin 25 (25 Jun 2007) |
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The news last Wednesday, on the release of the minutes of the latest MPC meeting, that the committee had voted to keep rates unchanged at 5.50% by a majority of 5-4, with Governor Mervyn King being outvoted again, was initially greeted by the market as bullish for sterling. The GBP/USD rate rose about a cent to 1.9930 in the immediate aftermath on the basis that, against a market expectation of a 7-2 split for a ‘no-change’ decision, the 5-4 vote meant that the committee... |
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| Weekly Bulletin 24 (18 Jun 2007) |
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The debt markets just about held their nerve last week as rates continued to rise, but by a much smaller amount than the previous couple of weeks. Again, the biggest increase was seen at the ultra-long end of the market with the EUR and GBP 30 year rates moving up by circa 0.13%. Interestingly, the USD equivalent remained unchanged... |
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| Weekly Bulletin 23 (11 Jun 2007) |
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The debt market suffered another grim week with the medium and longer term pushing higher in all major currencies. Indeed, it was the ultra-long rates that suffered the most damage. The GBP and EUR 30 year rate increased by circa 0.13% over the week, while US equivalent boomed out by 0.25%. This ultra-long end of the market has had quite a dramatic month. A month ago the 30 year USD rate, currently 5.92%, was trading 0.50% lower and the EUR rate, currently 4.77%, was trading 0.30% lower. In comparison, the 0.20% increase that has been seen in the GBP 30 year rate to 5.19% looks relatively mild... |
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| Weekly Bulletin 22 (05 Jun 2007) |
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The global debt markets continued to see rates drift higher over the course of last week, but it was a fairly muted affair in comparison with some recent movements. For the UK market, the economic messages were unhelpfully conflicting. Mortgage applications showed a larger fall than had been expected, but any encouragement that might have provided was offset by the CBI distributive trades survey... |
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| Weekly Bulletin 21 (30 May 2007) |
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The UK debt market suffered another shift to higher yields last week with the minutes of May’s MPC meeting leaving little doubt that further rate hikes are in the pipeline. The market’s reaction was to shift rates so that a 6.00% base rate is now factored into the yield curve... |
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| Weekly Bulletin 20 (21 May 2007) |
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The debt markets suffered another difficult time last week with rates increasing almost across the board. The US had the worst time with 5 year rates increasing by about 0.15%. In comparison, the rise in the 5 year rate of 0.07% in EUR and of 0.04% in the UK were quite subdued. Given that the Bank of England Inflation Report, released last Wednesday, was pretty overt about the need for further rate hikes, the rise in UK rates might be regarded as unexpectedly minor, but probably reflects the market having already determined that it was almost inevitable that rates would have to rise again before the current upward trend has run its course... |
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| Weekly Bulletin 19 (14 May 2007) |
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The meetings of the major central banks last week produced the expected results. The FOMC left rates unchanged and did little to suggest that they will do anything else until there is a clearer picture in the USA. The ECB also left rates unchanged, but President Trichet repeated the mantra of the requirement for ‘strong vigilance’ , reinforcing the market’s belief that a rate hike to 4.00% next month is a certainty. The MPC did raise rates, but only by the standard 0.25% to 5.50%, thus relieving fears that they might opt for a more strident message to be given to the free-spending consumer... |
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| Weekly Bulletin 18 (8 May 2007) |
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This week sees a ‘holy trinity’ of central bank monetary policy-setting committees, with the FOMC and ECB both expected to leave rates on hold – albeit with the ECB widely expected to signal a further increase of 25bps to 4% in June through a requirement for ‘severe vigilance’ to be maintained on inflationary pressures.. In the UK, however, with a Reuters poll of 61 economists showing unanimity... |
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| Weekly Bulletin 17 (30 April 2007) |
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The UK interest rate market continued its gradual drift to higher levels last week, despite efforts by various members of the MPC to apply a calming influence. In last week’s Bulletin we raised the potential prospect of the MPC’s eventually being forced into taking more drastic action than the occasional 0.25% rate hike to bring longer term inflationary pressures under control, with this, in turn, leading to considerably higher rates than currently anticipated by the market. This was a topic that emerged at several meetings last week and we should emphasise that we think it is longish odds against its happening... |
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Lenders pull fixed deals as swap rates increase (moneymarking.com) - 26-Apr-2007 Lenders have been withdrawing fixed-rate mortgage deals amid speculation of a bank base rate rise in May. Alliance & Leicester, Nationwide, Northern Rock and Portman are some of the big names that have been forced to take the move following an increase in swap rates. Many economists expect bank base rate to increase from 5.25 per cent next month after inflation hit 3.1 per cent in March. The monetary policy committee meets on May 10. Moneysupermarket.com head of mortgages Louise Cuming says: "It may seem like a rash decision to remove fixed-rate deals from the market but it probably would have happened anyway. Tuesday's inflation announcement has simply brought it forward a few weeks. "Fixed rates have to be the best advice for first-time buyers because many have to borrow to their upper limits. Now those fixed-rate products have been withdrawn, we can expect lenders will soon announce a raft of new deals with increased fixed rates. This will surely have an impact on first-time buyers and the market. People might begin to think twice about moving. It is hard to see how the market will not come to a standstill." A Nationwide spokesman says: "Money-market rates have increased recently. Unlike many lenders, Nationwide does not impose a higher lending charge for customers who want to borrow more than 90 per cent loan to value. All Nationwide's mortgages offer borrowers the additional flexibility to overpay or underpay during the deal period." |
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| Weekly Bulletin 16 (23 April 2007) |
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The UK debt market had another rocky old time last week as it had to take on board a variety of economic statistics that confirmed that a rate hike next month is a virtual certainty, and that a further rise hereafter is looking increasingly likely. It hardly needed a set of unhelpful economic numbers to confirm that a rate hike would be forthcoming next month. One look at the minutes... |
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| Weekly Bulletin 15 (16 April 2007) |
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UK, US and eurozone interest rates all drifted upwards
again last week on market concerns that, in the UK and
eurozone, short term rates may not necessarily peak after
just one more rate hike. The US had been trading on the
basis that short term rates would start to fall before the
year end, a prospect that now looks increasingly in
doubt. There had been some hope that EUR interest
rates... |
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| Weekly Bulletin 14 (10 April 2007) |
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Markets waited with bated breath last Thursday for the MPC’s base rate announcement, with the market fairly evenly split between those expecting a 25 bps hike and those anticipating no change. The return of a ‘no change’ decision produced a knee-jerk and very short-lived 40 pip sell-off of the GBP against the USD. The near-end short sterling futures staged only a modest 4 to 5 bp rally... |
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| Weekly Bulletin 13 (2 April 2007) |
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UK and EUR rates continued to drift upwards last week on a mixture of encouraging economic news and, in the UK’s case, increased nervousness that the MPC will raise rates at its meeting later this week. The main item for the UK this week will be the MPC meeting as there is little economic data being released that is likely to have much influence on the market. Most polls of forecasters would indicate... |
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| Weekly Bulletin 12 (26 March 2007) |
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UK rates have moved up by about 0.10% over the past week as considerably worse than expected inflation figures and a higher than forecast bounce in retail sales caused the market to revise its growing optimism that a further rate hike might not be required, despite a surprising voting pattern at the MPC’s meeting. The rise in inflation saw the targeted CPI measure increase from 2.7% back up to 2.8% while the headline figure moved up to 4.6%,.. |
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| Weekly Bulletin 11 (19 March 2007) |
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Last week proved to be a very quiet week with UK and EUR rates little changed, although US rates managed a small reduction. New economic information in the UK was in short supply with only the latest labour market figures to stir up any interest. After the concern shown by the MPC, and Mervyn King in particular, over the danger that inappropriately high wage settlements would lead to second round inflation, January’s figures proved to be reassuring... |
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| Weekly Bulletin 10 (12 March 2007) |
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The rally in the debt markets petered out last week as fears of a US recession subsided and the equity markets managed to regain some composure. In addition, the ECB duly raised its refinancing rate to 3.75%, while the MPC left rates on hold. As both results had been expected, the market was left to wonder whether it had not rather overdone its optimism. A feeling reinforced by President Trichet making it pretty clear that the ECB was minded to... |
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| Weekly Bulletin 9 (5 March 2007) |
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Interest rates in the UK, US and eurozone start this week at substantially lower levels than seven days ago as the rally is extended into its third week. The stimulus for the rally last week was the sudden and unexpected fallout in the equity markets. While Tuesday’s fall in the equity markets did not seem to be generated by any one fundamental event, it quite clearly shows that the level of confidence in the value of financial... |
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| Weekly Bulletin 8 (26 February 2007) |
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Rates struggled to hold their improved levels over the course of last week, but a rally at the very end of the week which has been continued today sees rates back to, and even below, the levels prevailing seven days ago. The major event for the UK debt market last week was the release of the minutes of the MPC meeting which showed a 7 -2 vote in favour of leaving rates on hold... |
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| Weekly Bulletin 7 (19 February 2007) |
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Rates in the UK start this week some 0.10% lower than a week ago following some very helpful economic data being released, combined with the influence of a very benign testimony by Ben Bernanke to the Senate on the state of the US economy. Not surprisingly US rates also eased by a similar amount. The economic statistic that... |
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| Weekly Bulletin 6 (12 February 2007) |
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Last week saw the foreign exchange market’s attention
focussed firmly on inflation and interest rates. As
expected, both the ECB and MPC held rates unchanged
on Thursday, although President Jean-Claude Trichet’s
use of the phrase ‘strong vigilance’ in the ECB’s
monitoring of inflation reinforced the view that eurozone
rates will rise next month to 3.75%.
With interest rates either rising or having already risen... |
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| Weekly Bulletin 5 (5 February 2007) |
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The UK market starts this week in a fairly nervous state as worries have emerged that the MPC will raise rates again after their meeting on Thursday. While most surveys of economists show a very small minority actually expecting the MPC to raise rates again, it is perhaps not surprising, after last month’s ‘shock’, that equally few are willing to count out the possibility of further action as being out of the question.
Almost all of the news that has emerged since the last MPC meeting... |
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| Weekly Bulletin 4 (29 January 2007) |
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Interest rates in the UK continued their upwards drift throughout last week, although the rise in UK rates was concentrated in the longer maturities. However, this was not just a domestically-generated bout of further pessimism but, as before, followed the trend being set in the US where the rate increases were rather more marked. This transatlantic influence also had its effect on EUR rates... |
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| Weekly Bulletin 3 (2 January 2007) |
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Just over a year ago, the release of the minutes of the Fed’s meeting of 13th December 2005 had temporarily convinced the market that there would be no US rate rises in 2006 beyond 4.5%. In fact, there were three rises beyond this point and we were, therefore, somewhat surprised to see our forecasts of GBP/USD 1.9000 and EUR/USD1.3000 exceeded, with GBP/USD and EUR/USD closing the year at 1.9588 and 1.3196... |
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| Weekly Bulletin 2 (15 January 2007) |
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Firstly, we would question how great a shock it actually was. While it certainly will have been to the unfortunate RBS economist who last Thursday sent an email to the bank’s customers assuring them that the MPC would leave rates unchanged and that they believed that 5.00% would prove to be the peak of the monetary tightening cycle, it was much less of a shock to bank dealers... |
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| Weekly Bulletin 1 (8 January 2007) |
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Looking back to a year ago, we thought that the domestic interest rate market was likely to experience a dull time. This was a pretty widely held view with forecasters predicting that base rates would be anywhere between 4.00% and 5.00% by the end of the year. A 1.00% variance between the most bullish and bearish forecasters represents a fairly narrow spread. As we were at the upper end of the these forecasts... |
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Updates provided by J.C. Rathbone Associates Limited |
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