Author Topic: Bank of England warns of risk to financial security  (Read 463 times)

Caesar

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Kaitsu

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Re: Bank of England warns of risk to financial security
« Reply #1 on: October 11, 2022, 08:41:55 AM »
Unusually strong language from a Central Bank!

Certainly cause for concern (as if there weren't enough things to be concerned about right now!)
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Peterma

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Re: Bank of England warns of risk to financial security
« Reply #2 on: October 11, 2022, 09:04:13 AM »
Hmmm.. UK selling their linkers this morning and will buy 'em back this evening.

I'm having a huge re-think on this Govt economics :(

Btw - for guys learning who may be reading in later times linkers are:
https://www.dmo.gov.uk/data/gilt-market/index-linked-gilts/

Just skip the cookies - works fine.

Kaitsu

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Re: Bank of England warns of risk to financial security
« Reply #3 on: October 11, 2022, 10:20:04 AM »
Hmmm.. UK selling their linkers this morning and will buy 'em back this evening.
At least EURGBP seems to be relaxed about it! :)
Ships are safe in harbour - but that is not what ships are for....

Peterma

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Re: Bank of England warns of risk to financial security
« Reply #4 on: October 11, 2022, 11:49:12 AM »
Aye, so far so good - the big question is what happens after Friday.

I'm keeping an eye on the 10yr - the down arrow was day before the mini budget - most details leaked to press by then (as they usually do)


eddieb

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Re: Bank of England warns of risk to financial security
« Reply #5 on: October 11, 2022, 12:52:20 PM »
It's no wonder sterling is falling. Quite aside from the geopolitical issues globally and especially in the UK, its becoming clear that there is little support for the PM and Chancellor even within their own party.
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Peterma

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Re: Bank of England warns of risk to financial security
« Reply #6 on: October 11, 2022, 09:22:50 PM »
At least EURGBP seems to be relaxed about it!

Chairman of BOE said this evening that there would be no extension beyond Friday - and Eur/Gbp has reacted by 120 pips.

Sometimes I wonder about these guys - a simple "we might continue to a lesser degree if needed" or some other such fudge would have been enough -

Aye, so far so good - the big question is what happens after Friday.

Even I had the wit to see the danger of Friday's cut off this morning.

And to think they good rid of a reasonably good chancellor and not so bad a BoE chairman - ah well, onwards we go :)

Kaitsu

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Re: Bank of England warns of risk to financial security
« Reply #7 on: October 12, 2022, 07:20:55 AM »
Sometimes I wonder about these guys - a simple "we might continue to a lesser degree if needed" or some other such fudge would have been enough -
Yes, this has always been an issue with the BoE and is the main reason why I never take short term speculative trades involving GBP (which is probably what the the BoE wants anyway!! :D).

I remember (vaguely) 40 yrs back working as a young mortgage lender in a high street bank in the UK. The BoE had no worries then about announcing interest rate changes completely without warning and disrupting and unsettling the market. Making statements and taking actions without any consideration of their impact on markets is the trade mark of the BoE.

Interesting though, at least in this case, if I had had a position, it would have been in the right direction! :D The charts have shown a potential move in this direction for some time.   
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Peterma

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Re: Bank of England warns of risk to financial security
« Reply #8 on: October 12, 2022, 08:31:14 AM »
Interesting though, at least in this case, if I had had a position, it would have been in the right direction!  The charts have shown a potential move in this direction for some time.   

Yes - from my own pov the moves on E/G are good since I'm exporting to EU, but it's the young mortgage seekers that are feeling the brunt.

I know of 2 cases locally who have been put 'on hold' so to speak.

Then there are the pension holders - a 67yr old colleague got a quote Monday - the pot is down just over 5% since last year despite paying in every month.
Then of course the bank are now back-tracking this morning - doing exactly what I suggested last evening - being suitably vague about extension and leaking their comments to the FT.

This is not management, it's simply acting, then waiting for market reaction and then reacting.

The BOE adopted a similar approach to the threat of inflation when it first arose (the buzz word was 'transitory') - that's why the chart on GBP is reading as it is today.

Nothing much we can do about it I suppose other than hope.

Kaitsu

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Re: Bank of England warns of risk to financial security
« Reply #9 on: October 12, 2022, 09:11:56 AM »
Yes - from my own pov the moves on E/G are good since I'm exporting to EU, but it's the young mortgage seekers that are feeling the brunt.

I know of 2 cases locally who have been put 'on hold' so to speak.

Then there are the pension holders - a 67yr old colleague got a quote Monday - the pot is down just over 5% since last year despite paying in every month.
Then of course the bank are now back-tracking this morning - doing exactly what I suggested last evening - being suitably vague about extension and leaking their comments to the FT.

This is not management, it's simply acting, then waiting for market reaction and then reacting.
Yes, the mortgage market is very different nowadays in the UK and a lot of people are concerned about the financial impact of higher rates. But this is perhaps mainly due to the high cost of properties (and consequently loans). I remember the time when the inflation rate was in double figures and even reached about 24% in the 70's. In those times mortgage rates were also around 17%, as were pay increases. The general attraction of home-ownership then was that inflation paid for a large part of one's loan!  House values rose in line with inflation but the mortgage balance remained the same and reduced in real terms as inflation ate it away. And, of course, as pay levels increased the mortgage payments also decreased considerably as a proportion of earnings. For some, inflation was a very good thing!!! :D

Nowadays, our main interest in the EURGBP is only down to family connections and travel/holidays and pension incomes (which fortunately are nicely index-linked).
« Last Edit: October 12, 2022, 09:16:01 AM by Kaitsu »
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Kaitsu

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Re: Bank of England warns of risk to financial security
« Reply #10 on: October 12, 2022, 06:15:52 PM »
Chairman of BOE said this evening that there would be no extension beyond Friday - and Eur/Gbp has reacted by 120 pips.
Seems to have been a short-lived blip afterall. We're back in the old range again around 0,8750!

Is this because Liz Truss managed to calm the waters during PM questioning?
Ships are safe in harbour - but that is not what ships are for....

Peterma

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Re: Bank of England warns of risk to financial security
« Reply #11 on: October 12, 2022, 10:06:00 PM »
Is this because Liz Truss managed to calm the waters during PM questioning?

Some sense returning to the political sphere - Business Sec, Jacob Rees Mogg is apportioning blame at the BOE's door re past dithering on inflation as mentioned above, OBR now publishing 31st Oct - forward from end of Nov (remember they were sidelined on the mini budget), detailed account from Chancellor promised same date - a forward p&l so to speak.
Add that the BoE have warned of yet more rate rises plus a general expectation post PM questions that there will be some rowing back -likely in the area of Govt spending (not cuts but more efficiencies is how that will be sold)

Generally I'd say that the sacking of the Treasury chief Tom Scholar in early Sept was the beginning of the trouble, this is a guy with huge experience who obviously didn't fit the new Govt's vision of economics.

Peterma

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Re: Bank of England warns of risk to financial security
« Reply #12 on: October 12, 2022, 10:25:29 PM »
One other aspect - Andrew Bailey, Chairman of BoE, yesterday warned the pensions industry that they have 3 days to sort themselves out:
"I'm afraid this has to be done, for the sake of financial stability,"

Bank saying it's not our problem after Friday but yours (or the Govt's)

What happens I wonder if the expected political U turn(s) do not materialize - nah.... not possible... or is it?

We'll know by Nov 1st - that's on a Tuesday.

Kaitsu

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Re: Bank of England warns of risk to financial security
« Reply #13 on: October 13, 2022, 07:17:43 AM »
Thanks for the update.

It is quite interesting, in general, to ponder the differences between the actions and possibilities of two-party systems, such as in the UK and the US, compared with countries with coalition governments comprising anything from 2-6 different parties. The latter are invariably constrained by the need for compromise and can be accused of impotent, watered down, politics and decision-making. The former, on the other hand, can act faster and more radically - which can also risk serious misjudgements and damaging, sometimes irreversible, major change and upheaval.

Both of these, of course, can be compared with dictatorial government which is a totally different world!
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Caesar

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Re: Bank of England warns of risk to financial security
« Reply #14 on: October 13, 2022, 08:50:17 AM »
I find it frustrating that in a 2 party system, when we get into the last 2 years of the incumbent partys term, policies are often dictated as much by the one eye on the upcoming election and what they think is needed to buy votes as it us by what is actually best for the country.
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