Well, that was quite a few days in sterling bond markets. Last week I wrote about how central banks had lost their compass and were becoming ‘data watchers.’ This week I am reflecting on a dreadful set of UK inflation data and, again, the implications for interest rates.
Inflation is a funny thing. We observe price levels in everyday life, not the rate of change in those prices.
The Bank of England (BoE) is in a bind. It anticipates that inflation is going to fall quickly during the rest of the year, but its credibility is being tested.
Who would have thought that the British pound would be the top performing major currency last quarter?
I could write about the relative stability of bond markets and the unwinding of some of the more aggressive interest rate cut calls.
It was my birthday last Monday, and I took the day off work, which I don’t usually do on my birthday but I’d planned for it and, I have to say, it made a pleasant change.
The current banking crisis is a great illustration of how markets work and why economics is not a science – despite attempts to convince that it is.
Last week saw the failure of SVB Financial Group, the parent of Silicon Valley Bank. SVB is a commercial US bank that primarily serves technology and life science companies, with deposits significantly placed in US treasuries.
The UK’s reputation has suffered in recent years. Chaotic government, threats to repudiate international treaties, a diminished standing on the world stage – a preeminent 19th / 20th century power living on past glories, mired in nostalgia but unable to learn lessons from history.
There are stirrings on the political front. The resignation of Nicola Sturgeon as leader of the Scottish National Party (SNP) will have repercussions throughout the UK.
The UK is not in recession but nor are we growing. Q4 growth was zero, having fallen 0.3% in Q3. Not a technical recession – that is yet to come. The breakdown was a bit mixed. Surprisingly, fixed investment was up 1.5%, contradicting the downbeat nature of recent surveys.
There was a smell of spring in the air last week. Snowdrops and crocuses are out and there is a growing sense that the worst of winter is behind us.
My wife is an archaeologist. When in social gatherings her job has always garnered more interest than mine, which in noisier atmospheres is often heard as fun manager.
One question that I get asked a lot at the moment is that if I expect recessions in many of the leading economies, why am I positive on credit?
2022 was a traumatic year for financial markets – but this is something we are getting used to. Fixed income markets were the main casualty with both government and credit bonds taking a battering.
Is the UK heading for a housing crash? Last week saw the Halifax house price index decline by 2.3% in November, confirming the fall reported earlier by Nationwide.
Last week was all about interest rate decisions. Strangely, although the Federal Reserve (Fed), Bank of England (BoE) and European Central Bank (ECB) all increased rates by 50bps there was quite a bit of divergence underneath.
Sometimes markets see what they want to see. The interpretation of the latest statements from the Chairman of the Federal Reserve (Fed) was a case in point.
Michael Dobbs, author of House of Cards, would have been hard pressed to come up with the story lines that have played out in the UK in the last few months.
The Blame Game has started. Who should be held responsible for the shambles of last week? Let’s look at the suspects.