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Tag: U.K. 30 Year Gilt

  • Bond yields tumble ahead of new chancellor’s budget statement

    Bond yields tumble ahead of new chancellor’s budget statement

    U.K. bond yields tumbled on Monday ahead of a planned statement from new Chancellor of the Exchequer Jeremy Hunt laying out budget plans ahead of the Oct. 31 medium-term plan. The yield on the 30-year gilt
    TMBMKGB-30Y,
    4.477%
    fell 36 basis points to 4.49%, while the pound
    GBPUSD,
    +0.79%
    rose to $1.1257. Hunt also gave a series of interviews over the weekend and is expected to eliminate most of other tax cuts laid out in the mini budget.

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  • U.K. bond yields continue to drop as Kwarteng set to be fired with further tax-cut reversals expected

    U.K. bond yields continue to drop as Kwarteng set to be fired with further tax-cut reversals expected

    U.K. bond yields continued to drop on Friday, on expectations the U.K. government will further backtrack on its tax cut plans and that U.K. Prime Minister Liz Truss will fire Chancellor of the Exchequer Kwasi Kwarteng.

    Kwarteng was photographed entering Downing Street after flying home early from the International Monetary Fund meeting in Washington, D.C. Truss’s office has announced a press conference. Both The Times and the Financial Times newspapers reported Kwarteng will be fired.

    The yield on the 30 year gilt
    TMBMKGB-30Y,
    4.265%
    — which was high as 5.1% as recently as Wednesday — fell 28 basis points to 4.27%.

    The yield on the 10-year gilt
    TMBMKGB-10Y,
    3.947%
    dropped 25 basis points to 3.95%. Yields move in the opposite direction to prices.

    The pound
    GBPUSD,
    -0.75%
    fetched $1.1273, down from $1.1331 on Thursday.

    Kwarteng in recent interviews has done nothing to douse speculation the U.K. government will further pare its tax-cut plans.

    Speculation of further U-turns has centered around corporate tax cuts in particular. Other tax cuts that could be reversed include the planned personal income-tax reduction to 19% from 20%.

    The government has already relented on a planned cut for those making above £150,000. Financial markets gyrated after Kwarteng announced its mini-budget, which called for some £45 billion in tax cuts on top of capping energy prices. Investec Securities estimates the total cost of the stimulus to be on the order of £150 billion.

    A medium-term fiscal plan, as well as an independent forecast from the Office of Budget Responsibliitiy, is due at the end of October.

    The Bank of England’s emergency bond-buying plan — designed to ease tensions for pension funds — is due to expire on Friday.

    The central bank says it’s purchased £17.8 billion in securities.

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  • As bond yields spike, Bank of England widens U.K. market intervention in second effort this week to calm volatile markets

    As bond yields spike, Bank of England widens U.K. market intervention in second effort this week to calm volatile markets

    The Bank of England said Tuesday that it will expand its daily U.K. bond purchase operations to include index-linked gilts, the second move this week aimed at trying to calm market volatility.

    “These additional operations will act as a further backstop to restore orderly market conditions by temporarily absorbing selling of index-linked gilts in excess of market intermediation capacity,” the BoE said in a statement on Tuesday, adding that it has also consulted with the Debt Management Office.

    The inclusion of those index-linked bonds will run from Oct. 11 to 14, alongside its existing daily conventional gilt purchase auctions, the BoE said.

    But it remained to be seen if a second-day move by the central bank to calm markets will be effective.

    Investors are anxiously looking ahead to Friday, when the central bank’s emergency bond-buying program announced last month are scheduled to end. The BoE announced additional measures on Monday to smooth that path, but the yield on the 30-year gilt 
    TMBMKGB-30Y,
    4.667%
    jumped 29 basis points to 4.68% on Monday.

    While that’s still below the 5.17% peak, it indicates concerns about the imminent end to the central bank’s program were causing fear in the market. The yield on the 10-year gilt 
    TMBMKGB-10Y,
    4.431%    ,
     which the central bank has not been buying, rose 24 basis points to 4.47%

    On Monday, the BoE said it would boost the size of its daily gilt purchases and implement extra measures “to support an orderly end” to its emergency bond-buying plans.

    It now will buy up to £10 billion ($11 billion) in bonds, up from a previous auction limit of £5 billion ($5.5 billion), though sticking with its pricing policy that has seen the central bank refuse many of the bonds put up for auction.

    The BoE also said Monday that it plans to to launch a temporary expanded collateral repo operation for liability-driven investment funds through liquidity insurance operations, which will run beyond the end of this week.

    LDI funds are a popular product sold by asset managers like BlackRock
    BLK,
    -0.88%    ,
    Legal & General
    LGEN,
    -2.99%
    and Schroders
    SDR,
    +0.05%
    to pension funds, using derivatives to help them match assets and liabilities so there is no risk of shortfall in money to pay pensioners.

    But those measures failed to stop bond yields from surging, amid market fears that the pension fund market is not yet ready for that temporary debt purchase program to end.

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  • U.K. to bring forward budget review to Oct. 31

    U.K. to bring forward budget review to Oct. 31

    The U.K. Treasury announced Monday it was bringing forward the publication of an independent review into its budget plans to the end of October.

    Bond yields were still higher on the day, but off their highest levels. The 2-year gilt
    TMBMKGB-02Y,
    4.189%
    yield , as high as 4.23%, was at 4.18%, while the 30-year gilt
    TMBMKGB-30Y,
    4.520%    ,
    which had a yield as high as 4.56%, was at 4.51%.

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