[Politics] Liz Truss **RESIGNS 20/10/2022**

[Audax]

OK, initial reaction in Gilt markets looks to have paused now. 10yr gilt interest had been trading around 4.5% and hinting at going even higher. After the BoE announcement it crashed down to a tick over 4% and is now looking like it's settling at that level for the moment.

On the GBP side, looks like the market just doesn't know what to make of the announcement. GBP had been trading in a range between US$1.065 and $1.07, cycling between peaks and troughs. Post announcement it spiked to $1.078, then crashed to $1.0636, headed back up towards $1.07, and is now back down again $1.066.

There's now an announcement from the Treasury that they are "working closely" with the BoE. There's a risk here that they'll spook the markets further if they see this as a watering down of BoE independence.

 

[LamieRobertson]

OK, initial reaction in Gilt markets looks to have paused now. 10yr gilt interest had been trading around 4.5% and hinting at going even higher. After the BoE announcement it crashed down to a tick over 4% and is now looking like it's settling at that level for the moment.

On the GBP side, looks like the market just doesn't know what to make of the announcement. GBP had been trading in a range between US$1.065 and $1.07, cycling between peaks and troughs. Post announcement it spiked to $1.078, then crashed to $1.0636, headed back up towards $1.07, and is now back down again $1.066.

There's now an announcement from the Treasury that they are "working closely" with the BoE. There's a risk here that they'll spook the markets further if they see this as a watering down of BoE independence.

Bit of a bounce in certain sectors of the stock market ….REITS have been particularly hard hit this past week

 

[Machiavelli]

Exactly.

I had to find a very similar deposit for a flat I bought in Clapham around 2000.

I've just checked and it was sold 3 years ago for three times the amount I bought it for.

Mine was on Landor Road, which I'd imagine you know. Sold it for 2.4x price in 2002.

 

[Machiavelli]

BoE announces intervention in Gilt markets. 10yr Gilts interest rates now dropping like a stone. GBP value initially spiked upwards, but has rapidly dropped back.

Interest rates on Gilts dropping is a good thing. But the fact it's the result of the BoE bailing out the government isn't.

Why? Is it because its independence has been compromised as a result?

 

[sparkie]

Luxury - we used to dream of licking road clean with tongue [emoji106]

I had a really bad day when I was made redundant from road licking.

 

[Audax]

Bit of a bounce in certain sectors of the stock market ….REITS have been particularly hard hit this past week

Seeing some talk the BoE acted specifically because they saw imminent significant risk to the pensions sector.

Looks like Sterling has, after a brief period of "wtf?!" shrugged this off and settled back into its pre-announcement trading range. 10yr Gilts now dipped below 4%, but the trajectory of the drop has slowed.

All this very much a temporary measure. Need to wait and see if it does stabilise the markets long enough for the BoE to get to early Nov and something they can sell as a standard non-emergency rate rise - and then beyond that Kwarteng's second bite at the cherry.

 

[Gwylan]

Exactly.

I had to find a very similar deposit for a flat I bought in Clapham around 2000.

I've just checked and it was sold 3 years ago for three times the amount I bought it for.

I bought a flat in Balham in 1994, sold it in 2001 for three times the amount. A couple of years ago, I checked the market and a flat in the same street was on sale for nearly four times the price that I sold it for. Salaries definitely haven't gone up twelve-fold in 20 years.

 

[Audax]

Will this help with inflation?

It will, hopefully, help with preventing a sudden spike in mortgage rates. It should also help prevent / reduce a sudden shock in pensions sector.

Any impact on inflation would be indirect via helping prop up the value of the GBP. Not seeing that happen yet, however.

 

[clapham_gull]

Mine was on Landor Road, which I'd imagine you know. Sold it for 2.4x price in 2002.

Bimey, we were neighbours.

 

[Audax]

Why? Is it because its independence has been compromised as a result?

Partly that - the twin announcements today indicate there is a possible risk that independence is being eroded.

But I'm more thinking in terms of what this all means in regards to the competence of Truss and Kwarteng. They initiated the turmoil that has forced the BoE to act. The BoE has effectively been forced to (in theory temporarily) reverse their policy position: they wanted to start *selling* gilts next month, not be buying more. That the BoE have done this tells us that the situation was out of control and needed intervention. That's not good.

 

[A1X]

[tweet]1575073764572008448[/tweet]

 

[A1X]

Partly that - the twin announcements today indicate there is a possible risk that independence is being eroded.

It's worth remembering several times during the leadership contest, Liz Truss made several veiled threats to the independence of the BoE and bringing it back under Government control before eventually being talked back from that particular precipice. So we could, in another parallel universe, be taking this ride with the brake cables cut.

 

[Thunder Bolt]

Pensions are getting hammered

[tweet]1575073150064545797[/tweet]

 

[Guinness Boy]

I'm not sure you have quite grasped how dire the situation will be for some though. Our mortgage (about 2% on around £330k) is due to end in September next year and if rates do indeed go up to 6% then we're looking at about £600-700 a month increase, purely to cover the interest rise. On top of other cost increases, with a little one on the way in February we'll be losing my wife's salary down to statutory around the summer and I'm genuinely worried if we'll be able to afford it. And (not meaning to brag), our household income is well above average, I struggle to think how others will cope - especially those who are renting, who will no doubt be passed on the mortgage increases.

In any case, most employment contracts these days (mine included) stipulate that you can't take up additional work without the permission of your company. I don't think many companies would be happy with their employees taking up more work in the evenings/nights and then turning up half asleep for their primary job.

Mine specifically prohibits it. We’re a global company- I’m often talking to the USA in the evening.


Sent from my iPhone using Tapatalk

 

[Audax]

GBP has crashed again now that market has digested what this morning's BoE intervention means, and news is out about why they acted (Pension funds getting hammered). GBP now worth less than US$1.06.

 

[Mackenzie]

Is the CoE deliberately crashing the economy?

 

[rogersix]

Is the CoE deliberately crashing the economy?

church of england?

 

[Jim in the West]

church of england?

We could certainly do with some help from above...

 

[sparkie]

Pensions are getting hammered

[tweet]1575073150064545797[/tweet]

Just checked my Pension Pot.

Yep, hammered.


Truss owes me.

 

[rogersix]

We could certainly do with some help from above...

a radical economic policy, devine intervention!