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GB10Y - UK pensions at risk? update. #BOE #recession"The Bank of England has hiked interest rates to 5 per cent in a further blow to homeowners struggling with spiralling mortgage costs. The rise, up from 4.5 per cent, is the sharpest increase since February – surprising economists who had been expecting a smaller increase of 0.25 percentage points – and sends interest rates to their highest level in 15 years! The move is set to deepen the mortgage crisis as borrowing costs rose for the 13th time in a row in an effort to curb inflation." *Fractal taken from 2007 high for the GB10Y - Gilt/Bond, reaching similar level's before reversing back down. I would expect the same to happen going forward. inflation is way above current interest rates, with the BOE stuck between banking crisis or a recession. I believe we'll see both! - Banking crisis, potential bail out's - expanding the currency supply further which will create more inflation! Pension's will continue too loose value, as bank of England will not be able to raise rates high enough to match inflation. "It comes as the rate of inflation remains unexpectedly stubborn – frozen at 8.7 per cent in May. Analysts had expected the Consumer Prices Index, which peaked at 11.1 per cent in October last year, to fall back to 8.4 per cent." What does this mean for the value of the pound? I'm actually expecting more strength in the GBP - purely from the weakness of the dollar. I would expect the fed to continue to pause now that inflation is finally dropping. FedNow expected to launch on the 1st of July, this will enable faster payment's and a surplus of dollars entering the markets if needed. again weaken's the purchasing power of the DXY - by adding more supply to the currency.
TVC:GB10YShort
by dibz1996
GBP/USD analysis: BoE hikes needed to curb gilts' term premiumFinally unveiled, the UK government's Autumn Budget was conservative and cautious, in line with market expectations. A fiscal consolidation of £55 billion has been announced, to be split evenly between more taxes and lower spending. From the next year until 2028, windfall taxes on oil and gas companies will increase from 25% to 35%, while the Energy Price Guarantee programme (EPS) has been revised to cut down on government spending. These two measures dominate the UK's fiscal adjustment. But now that the threat of losing the anchor of fiscal credibility has ended, sterling investors are once again confronted with the reality of the UK economic outlook. Inflation is expected to average 7.4% in 2023, but GDP will shrink 1.4% due to the recession. A higher and more persistent inflation rate requires the Bank of England to maintain its restrictive stance for a longer period of time. Furthermore, the longer inflation stays high, the more difficult it will be for gilts to lure buyers to these negative real yields, especially since the BoE will restart quantitative tightening in late November. GBP/USD has risen from 1.036 to 1.203 following the reversal of September's mini-budget, primarily due to lower gilt yields, as recovered market confidence in fiscal policy has stimulated demand for UK sovereign bonds. Gilt yields likely bottomed out before the UK Autumn Budget, as the market had largely anticipated the fiscal consolidation, and could now resume a natural upward repricing, not in a disorderly fashion, but adequately to reflect a high inflation/high interest rate environment. The outlook for the pound is now dependent on the Bank of England's policies. Hawkish BoE = Neutral/bullish scenario for the pound If the BoE turns out to be more hawkish than expected – markets are currently pricing in 60bps in December and terminal rate of 4.5% next year – it can better control inflationary expectations and pressures. In this scenario, UK interest rates will increase quicker than UK 10-year gilt yields, limiting the term premium and enhancing policy credibility. This is a favourable scenario for the pound, as it can restrict the downside and discourage speculators from shorting a currency with a high yield. Dovish BoE = Bearish scenario for the pound In contrast, if the BoE delivers fewer rate hikes than the market currently predicts, inflation expectations will not be restrained and long-term gilt yields would rise faster than UK interest rates, effectively placing downside pressure on the pound.
by Capitalcom
GBPNZD testing support + newsPrice is testing the support for the 4th time, such as MACD. We can see the columns in MACDS indicator losing power, and the line crossing each other. About candles we've a three inside up after testing the support, show us a bullish signal. And to conclude the Reerve Bank of New Zeland says "economy will slow as rising rates curb consumption", the houses prices are still expensive; and this morning in NZ we had data about unemployment and employment, and: Unemployment: 3,3%, higher thand expected (3,2%). They though the rate was lower than last Q, but is the same as the previous and higher than expected. Employment: Higher than expected with a change of 1,3bp and the forecast was 0,5% --------------------------------- Dont forget about yesterday: BOE made a £838b stimulus and sold £750m of gilts
Long
by AFCapital21
GBP/USD analysis: Sterling is no longer supported by gilt yieldsFor most of 2022, currencies were helped by rising yields on short-term government bonds. When looking at the UK bond market, rising gilt yields have reflected expectations of future interest rate hikes by the Bank of England, but ultimately they begin to incorporate more political and fiscal risks into their rate premium. Given the turbulent political climate in the UK over the last two months, the volatility of UK gilts has been exceptionally high. Liz Truss announced her resignation as British Prime Minister on Thursday, following a hectic 45 days in office that included a gilt market crash and a U-turn on her budget proposals. The most recent economic data, meanwhile, continue to paint a gloomy picture. September UK retail sales fell 6.9% year-on-year, a sixth consecutive monthly decline and worse than market expectations of a 5.0% drop. The GfK Consumer Confidence indicator went up a little bit to -47 in October, but it was still close to a record low of -49 in September. The pound is now behaving differently than the yield on 2-year gilts. Rising gilt yields now reflect not only the inflation/interest rate environment, but also the higher investors' uncertainty about the stability of the UK bond market. Episodes of rising gilt yields over the past few weeks have been correlated with a weaker pound. This playbook can be expected to continue in the coming months. If 2-year gilt yields were to surpass the 4% threshold once more, this would likely put downward pressure on the pound, which could eventually test and break below 1.10.
by Capitalcom
Timing the bond markets meltdownIs the UK bonds or the gilts the culprit that trigger the global bond markets meltdown? Not exactly. In fact, in April this year, there were clear signals that the global bond markets were already in trouble, and we will discuss that. Content: • Why we should not blame it on the U.K bonds, then who? • How to overcome this global bond crisis? Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. US T-Bond Futures: 1/32 of one point = US$31.25 32/32 is one point = 32 x US$31.25 = US$1,000 123 to 122 = 1 point = US$1,000 CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CBOT:ZB1!
by konhow
DJI and Bonds: Get your popcorn ready. In this short video I focus on the UK and US 10 year bond markets in comparison to the DJI. All these markets are linked up in the background - at the speed of light. There are no predictions here - only probabilities and speculation. High volatility is expected at the opening of the markets tonight, 16th Oct 2022. Some are predicting a 'Black Monday' type event next week, which doesn't have to happen on a Monday. I take no sides. I'm only protecting my losses in short positions and happy to let winners run. Stay safe, wash your hands, protect your positions, don't burn your accounts. 😁😂 Disclaimer : This is not advice or encouragement to trade securities or any asset class. Chart positions shown are not suggestions intended to assure you of an advantage. No predictions and no guarantees are supplied or implied. The author trades mostly trend following set ups which have a low win rate of approximately 40%. Heavy losses can be expected if trading live accounts or investing in any asset class. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on speculative opinion expressed here or on my profile and you lose your money, kindly sue yourself.
FOREXCOM:US30
by Captain_Walker
1
EURGBP:Looks like bulls will win?EURGBP I ntraday - We look to Buy at 0.8750 (stop at 0.8685) We are trading at overbought extremes. A lower correction is expected. The bias is still for higher levels and we look for any dips to be limited. We therefore, prefer to fade into the dip with a tight stop in anticipation of a move back higher. Our profit targets will be 0.8935 and 0.8960 Resistance: 0.8960 / 0.9200 / 0.9340 Support: 0.8720 / 0.8630 / 0.8530 Please be advised that the information presented on TradingView is provided to Vantage (‘Vantage Global Limited’, ‘we’) by a third-party provider (‘Signal Centre’ ). Please be reminded that you are solely responsible for the trading decisions on your account. There is a very high degree of risk involved in trading. Any information and/or content is intended entirely for research, educational and informational purposes only and does not constitute investment or consultation advice or investment strategy. The information is not tailored to the investment needs of any specific person and therefore does not involve a consideration of any of the investment objectives, financial situation or needs of any viewer that may receive it. Kindly also note that past performance is not a reliable indicator of future results. Actual results may differ materially from those anticipated in forward-looking or past performance statements. We assume no liability as to the accuracy or completeness of any of the information and/or content provided herein and the Company cannot be held responsible for any omission, mistake nor for any loss or damage including without limitation to any loss of profit which may arise from reliance on any information supplied by Signal Centre.
Long
by VantageMarkets
Bank of England Emergency Bond PurchaseLast week, UK pension funds, which hold highly leveraged bond derivative positions, were facing a nearly $1 trillion loss as bond prices crashed and yields rose. The crash in the bond market has been underway for years, but the tipping point occurred when the UK prime minister pledged to cut taxes at a time when inflation is soaring into the double digits. Cutting taxes worsens inflation because less taxes means consumers have more money to spend on inflating goods. Cutting taxes while inflation is high therefore risks worsening inflation or inducing hyperinflation. Fear of this caused the price of UK bonds to crash and yields to spike. (As many of you know well, bond prices move down when yields rise). This crash caused pension funds with highly leveraged bond positions to experience amplified losses, which caused these funds to need to put up more cash collateral on their losing positions. This could have caused a downward spiral because these funds may have had to sell bonds to raise more cash, which would have had a negative feedback loop that could have sent prices down further, amplifying losses more, and creating the need to raise even more cash collateral. The Bank of England had to make an emergency purchase of bonds. However, by purchasing bonds, the Bank of England has taken an action that will now make inflation worse (there will be a lag effect). Whenever a central bank purchases bonds, it is adding liquidity to the system (when the central bank buys bonds this has the effect of increasing the money supply). Increasing the money supply when inflation is at a multi-decade high is super risky. At best it could risk inflation staying elevated for longer, at worst it could spiral into hyperinflation. In the chart above, reproduced below, you can see that when priced in the British pound, crude oil prices are barely declining (as we would have expected from all the rate hikes). If anything, crude oil is looking poised to increase further. The Bank of England, and other central banks, are trapped. Until they stop monetary easing (adding to the money supply) and tighten the money supply such that rates are higher than core inflation, inflation will continue to get worse. Yet, as we now see in the UK, central banks cannot tighten the money supply sufficiently to accomplish this without causing a financial crisis. The rapidity with which the Bank of England switched back on the money printer, despite double-digit inflation, has me convinced that central banks will choose the hyperinflation route. In fact, hyperinflation is already happening in some countries. Argentina has hiked rates to 75% (not 75 bps, 75% or 7,500 bps) and yet inflation continues to spiral higher. There is actually no limit to how bad inflation can get. When people need to pay $100 trillion dollars for food, as in Zimbabwe in 2008, people usually stop believing that central bank fiat notes are valuable and the system collapses. Look at the chart below. I did not log-adjust the chart so that you can see that hyperinflation is when commodity prices rise exponentially over time. For the chart, I used the Invesco Commodity Index Tracking Fund (DBC) and priced it in Argentine pesos. I used cross plots on a smoothened moving average. This level of hyperinflation always leads to some kind of crisis. Either interest rates must crush demand and cause economic decline, or hyperinflation eventually causes a monetary crisis whereby people stop using the currency altogether. Commodity hyperinflation also leads to political instability and the rise of fascist or communist dictators. Furthermore, when these crises occur on a global scale, they can precipitate conflict, and conflict in turn can worsen commodity shortages. For those who have been thinking that inflation has peaked globally, there is no chart that I have seen which validates that conclusion. Indeed, as shown in the chart below, commodity prices continue to break record highs in some parts of the world. In most currencies, commodity prices appear to be bull flagging. Compare the below two charts. One shows how commodity prices continue to spiral higher in Argentina, despite the central bank hiking rates all the way to 75%, compared to 2008, when commodity prices fell while the central bank raised interest rates to just 12%. This shows that we are dealing with a much more dangerous type of inflation. I posted these figures to show just how bad inflation can get and the risks associated with monetary easing. Many people are believing the pig-in-a-python theory, where they think inflation is transitory and will improve when the massive COVID stimulus passes through the pipeline. However, what they fail to realize is that central banks have been putting an endless stream of pigs in the python for decades through monetary easing. Economies have become totally dependent on monetary easing and central banks are now trapped in needing to maintain it. Yet, if central banks continue monetary easing, inflation cannot come down. It just keeps spiraling higher so long as monetary easing continues, assuming commodity shortages also continue. Commodity shortages are deep-rooted and are due in part to war, deglobalization, aging and less productive populations, and climate change to name several factors. Monetary policy has little efficacy on these supply issues. Sri Lanka was the canary in the coal mine. It was the first central government to fall due to commodity hyperinflation. And yet, even after a central government collapse, commodity prices in Sri Lanka are still high. The chart below shows that commodities appear to be bull-flagging, and poised to go higher. Core inflation which is typically stable in the United States is now exploding to a 40-year high. If the Federal Reserve is to be successful at hiking rates to quell inflation, it must hike rates above the core inflation level. There is virtually no central bank with an interest rate higher than core inflation. Indeed, Japan continues to maintain negative interest rates. As I noted in a prior post, because negative interest rates incentivize the creation of money through credit, negative interest rates reflect limitless growth of the money supply. However, as alluded to above, the Fed is trapped. It must hike rates above core inflation, but it also cannot hike rates above core inflation. Decades of monetary easing have left a highly leveraged economy totally reliant on low interest rates. Hiking rates as far as would be needed to quell inflation would likely lead to an economic depression. Pension funds are already under tremendous strain from the hiking and yet the charts show that the scope of tightening that will be necessary is not even in sight yet. The best-case scenario is that commodity supplies improve and demand softens enough to stabilize rates but not so much that economies decline significantly. Even in this perfect mitigation scenario, stock market returns are likely to be muted for years to come.
Editors' picks
TVC:UKOIL
by SpyMasterTrades
65
Out of The Frying Pan, Into The FireIn terms of the global macroeconomic picture, the past two weeks have been nothing short of a firestorm. Last week, the UK government announced plans for unfunded tax cuts and additional government borrowing in the ‘mini budget’. This caused a drastic reduction in market confidence. Consequently the Pound crashed to under $1.04, historically low levels against the U.S. dollar. The volatility currently playing out in financial markets is unprecedented and akin to what we are accustomed to in the world of cryptocurrency. In order to try and stop the sell-off of the pound, yesterday the Bank of England reversed course and announced that it will engage in market operations. This will involve purchasing long-dated UK government bonds (known as gilts) in an attempt to halt the fire sale which was jeopardising major financial players such as Pension Funds. With these market operations, it is now likely that UK inflation levels will rip even higher than the eye-watering levels they are already currently at. The question now becomes, what will be the next central bank to blink and how will this continuous market chaos impact Crypto and other markets? Over the past few days, crypto and wider markets have been holding up relatively well given the state of the wider economic picture. However, with a recession looming the possibility of another leg down looks increasingly likely. In recent weeks we have seen a direct correlation between inflation levels and the price of certain cryptocurrencies. When U.S. inflation data came in on the 13th of September at 8.3%, 0.2% higher than expected, the price of Bitcoin nuked 5% in a matter of minutes. Some market forecasters assume that the Federal Reserve will eventually have to pivot and loosen up its policy, inviting in higher inflation but preserving the global financial system. However, little in the Fed’s communication so far implies that this is either likely or going to happen soon. Ultimately, either decision will have stark consequences for all financial markets, including cryptocurrency. As it stands, a market reprieve and return to an ‘up-only’ bull market seems unlikely in the foreseeable future.
U
by Coinrule
GBPCHF: Sterling woes continue!GBPCHF Intraday - We look to Sell at 1.0718 (stop at 1.0813) We look to sell rallies. There is scope for mild buying at the open but gains should be limited. The immediate bias is skewed to the upside but, with this move assessed as being corrective, we would prefer to sell into the rally. The medium term bias remains bearish. Our profit targets will be 1.0449 and 1.0110 Resistance: 1.0700 / 1.0900 / 1.1140 Support: 1.0425 / 1.0200 / 1.0000 Please be advised that the information presented on TradingView is provided to Vantage (‘Vantage Global Limited’, ‘we’) by a third-party provider (‘Signal Centre’). Please be reminded that you are solely responsible for the trading decisions on your account. There is a very high degree of risk involved in trading. Any information and/or content is intended entirely for research, educational and informational purposes only and does not constitute investment or consultation advice or investment strategy. The information is not tailored to the investment needs of any specific person and therefore does not involve a consideration of any of the investment objectives, financial situation or needs of any viewer that may receive it. Kindly also note that past performance is not a reliable indicator of future results. Actual results may differ materially from those anticipated in forward-looking or past performance statements. We assume no liability as to the accuracy or completeness of any of the information and/or content provided herein and the Company cannot be held responsible for any omission, mistake nor for any loss or damage including without limitation to any loss of profit which may arise from reliance on any information supplied by Signal Centre.
Short
by VantageMarkets
10-year Gilts 1-day classic patternsQ: What has the highest probability of occurring? Since early July there have been 4 tests of 132.000 resistance. There is a combination of 2 classic patterns forming at resistance. The double top, where both tops have been rejected at 132.000, is currently valid. The head and shoulders, the head consisting of the double top, would need to break the neckline ~129.750 to become valid. Both patterns equally project 128.250 as the target. Objectively looking at the entire base beginning around the high volume bar in February it is curve-like. Looking to the weekly timeframe it is quite possible this is the formation of a cup with the handle to follow. So there is some conflict in this area which can lead to a large number of market participants getting it wrong and as a consequence more momentum. It is quite probable that market participants have already shorted the double top breakout. Waiting for the head and shoulders to confirm with an ~129.750 neckline breakout before entry is advantageous. Stop placement above what appears to be a right shoulder at ~130.750 yields a 1.5R target. It would also be beneficial to visualise the 1-week handle as a means of guarding against the 1-day head and shoulder pattern failure.
UShort
by xciiitradingco
1
Heads Up...Tax Cuts Coming In UK !!!Important updates on the UK side for those in UK related assets. A game changer cabinet reshuffle to put a 🍒 picked “Yes man” in the Treasury. Downing Street making renovations and now in full control of not only No.10 but also No.11 (and scarily soon to be the BOE next month). Sunak will turn the fiscal taps on full blast, the fuel behind fiscal stimulus will come from fresh tax cuts in the UK ...Clean and simple legs available in the 2s10s, as markets begin to expect a looser fiscal policy a test of the Nov highs are in play. We will need to update the GBP macro charts over the coming sessions once we have confirmation in the headlines. Remember inversions in the US 2s5s setting the stage for recession... We traded the inversion here live in the UK: In any case, plenty of opportunities to discuss and in single stocks too. Smelling a major hammer to the UK economy coming at the end of 2020. As usual thanks for keeping the support coming with likes, comment and etc!
TVC:GB10YLong
by ridethepig
EURO - Where the money goes!Here you can see where the money from the euro area flows, among other things. Nobody talks about it and the media sell the "EU people" once again for stupid and tell corresponding fairy tales. The high of the Euro in the third week of February marks the low of 10-year British government bonds. The first of March low in the euro with 1.2124 marks the blue 1 high and the depreciation of the euro in the last few days can be seen nicely as a circled blue 3. In my opinion, no solutions can be brought by the ECB, because this central bank is the largest bad bank of all time. Full of government bonds issued by the "South&Western-States", which have no chance of sustained recovery in the corset of the Eurozone, this zombie portfolio will burst with full force. The only chance to save the EURO for a few more years is the introduction of EURO-Bonds and the Banking Union. This then throws the "German Volkssturm" as the last reserve, with the same outcome as in 1945. The only alternative to Safe your money, in my opinion, is not government bonds but are to be found in the equities segment. However, as the large capitals are focused on bonds, they seek out the most liquid assets such as USofA or UK bonds. The idea published here serves for the time being as illustrative material and has yet to establish itself. Greetings from Hanover Stefan Bode P.S. Fuck the EU or how did the Victoria Nuland - in the conquest ehm overthrow ehm democratic election of Ukraine by the US - so beautifully 2014 expressed?
ULong
by StefanBode
UK 10-year Gilts: Still lots of potentialBonds are holding at the minor projection at 121.72. Due to the underlying bearish momentum we expect a continuation towards the much more important targets at respectively 116.82 and 108.90. Note that this latter level is virtually equal to multiple pivots of 2013-2014. We maintain our strong negative stance versus bonds. Only a recovery above 125<>125.20 can ease pressure. Such a recovery is currently unlikely. Primary trend: negative Outlook: negative Strategy: hold short and/or short-entry bonds Support: 121.72 / 116.82* / 108.90 Resistance: 123.30 / 125.10+ Outlook cancelled/neutralized: above 125.10 OANDA:UK10YBGBP
UShort
by buyem_nl
UK 10-yr Gilt – Stuck at 23.6% FiboRebound from the low of 125.627 on the back of a bullish price RSI divergence and a bullish MACD crossover has run into resistance at 127.23, which is 23.6% Fibo resistance of the sell-off from 132.424-125.627. Given the bullish divergence on the 4-hr and bullish pin bar on the daily chart the odds of a break above 127.23 and a rise to 128.00 are high. Only a failure at 127.23 followed by a break below 126.37 would signal loss of bullish momentum.
U
by TipTVFinance