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Gilts Gone? October 14

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I figured I'd start a doomer thread for this Friday.

For those unaware, the 30 year UK gilt yield sky-rocketed in late Sept following an inflationary government budget plan.
The BoE "intervened" as several funds were getting margin calls they weren't able to cover. Worryingly, in a letter from the BoE it seems many funds were not able to sell!

Where capital was not incoming quickly enough, pooled LDI funds would have been forced to deleverage by selling gilts at levels far exceeding the normal daily level of gilt trading into an illiquid market. (Some funds had already tried to sell gilts and failed to do so.) With the gilt market unable to absorb further large sales, had large sales been
1 Margin requirements are a vital part of the financial system to manage counterparty credit risk.Bank of England Page 7
attempted yields would have been pushed even higher, forcing further gilt sales in an attempt to maintain solvency. This would have led to a self-reinforcing spiral of price falls and further pressure to sell gilts.

The BoE committed to purchasing £5 billion worth of gilts per day. Although in the same letter they described only purchasing £3.7 billion after 8 days of operations!

Meanwhile, the 30 year yield has resumed its upward trajectory and is now sitting at 4.5% (approx 60bps below its recent high) and the BoE has come out and publicly stated that pension funds have until Friday to sort their balance sheets out.

I thought I'd start this thread to get some ideas about what to expect should the BoE stick to their guns.
If pension funds are forced to dump gilts to settle margin calls, yields are going to soar higher. Besides the implications of higher debt financing costs, I would presume this would lead to additional falls in the GBP as money moves into USD. Or will we be looking at a default event for the UK?
 

Looks like a game of chicken between government and central bank. What was that famous Rothschild quote?
 
Time for a no confidence motion in Parliament?
This was the quote I was after...

"I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls the British money supply controls the British Empire, and I control the British money supply." Rothschild 1815
 
Time for a no confidence motion in Parliament?
or Chancellor Kwasi Kwarteng fall on his sword

Bloomberg now reporting UK Officials are working on a u-turn for Truss's cut plan. Yields heading lower, GBP rising.
and also, not inspiring confidence, when Bank of England governor Andrew Bailey ...
... "sent mixed messages over [the Bank's] intervention in the gilt market. Mr Bailey said unequivocally at a meeting in Washington that the bond-buying rescue mission would end this Friday. But only a few hours later, the
Financial Times reported the BoE telling bankers privately that the scheme would be extended"

....Amid market see-saws, the Bank was forced to issue a statement reiterating Mr Bailey’s words from Washington..
 
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Liz Truss expected to hold a press conference soon on the economy....



At Westminster, there were reports of fevered plotting among Tory MPs amid suggestions that Ms Truss's two main rivals for the Tory leadership over the summer - Rishi Sunak and Penny Mordaunt - could be installed at the head of a new administration.
What a joke...
 
am guessing outcast Farage , is the only one to unite the people , but has little hope because the Globalists still think they can win and trick England into rejoining that EU cesspit

there will be the Brussels administration overseeing regional councils ( no national parliaments required ) , unless the agenda fails ( completely )

the UK is failing apart first the Scottish vote and soon the Irish one ( to unite the island )

Britain started to fail once they elected Johnson
 
Hmmmm a phyrric victory for gilts?

The 10 and 30yrs and still close to their recent high, despite an increase in corporate tax and the Chancellor being axed....

More importantly, the BoE hasn't continued their operation (then again they haven't declared its cessation either) so the actions in late Sept weren't a true pivot.

Looks like the markets demand a greater sacrifice, and central bankers aren't going to do anything to stop them.

Scary.
 
Hmmmm a phyrric victory for gilts?

The 10 and 30yrs and still close to their recent high, despite an increase in corporate tax and the Chancellor being axed....

More importantly, the BoE hasn't continued their operation (then again they haven't declared its cessation either) so the actions in late Sept weren't a true pivot.

Looks like the markets demand a greater sacrifice, and central bankers aren't going to do anything to stop them.

Scary.
When a government shows total incompetence, the market assumes that any backtracking is not enough as additional stupidity is likely in the future.

A vote of no confidence has to occur and a sober conservative with a record and knowledge of how the economy works needs to be elected.

The Conservatives have such a person but he was beaten by sections of the right wing press looking for a tax cut for billionaires and the blindness of the rank and file members.
 
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Jeremy Hunt to make a statement on soon on the budget.
Commentators think there'll be more austerity.
This reminds of the 2010-2012 debate the ECB had. Austerity v. Money printer. Draghi (then ECB chair) famously came out with the 'whatever it takes' statement, declaring the death of austerity.
Now look at where we are...

Interesting times
 
BBC reporting that most tax cuts have been reversed and the energy support package will only last for 6 months instead of 2 years. Bond yields falling.

Meanwhile:

 
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