Cable Pounded Again After Indecisive Bank of England Statement

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    The markets had been waiting for a statement from the Bank of England bout the collapsing Pound. Nothing it seems at this point other than watching. T
    [See the full post at: Cable Pounded Again After Indecisive Bank of England Statement]


    Goldman Sachs Updated GBP

    “Considering the size and breadth of the fiscal package, even a 75bp hike seems likely to leave the BoE behind the curve on taming inflation and well below market pricing which is now close to 100bp,” GS notes.

    So against the backdrop of the large fiscal spend and question marks around the size and urgency of the monetary response, we are revising our GBP forecasts weaker vs EUR to 0.92, 0.90, 0.88 in 3, 6, and 12 months (vs 0.85, 0.83, and 0.84 previously. We are also downgrading our GBP/USD forecasts for 3, 6, and 12 months ahead to 1.05, 1.08, and 1.19 (vs 1.14, 1.17, and 1.25 previously),” GS adds.


    Heads Up: Bank of England Chief Economist Huw Pill is a panelist at the CEPR Barclays Monetary Policy forum 2022 on ‘Economic and Monetary Policy challenges ahead’ 1100 GMT Tuesday

    Traders will be looking for insight on GBP & Gilts


    UK 10 yr Bonds #Gilts Day highs +13 bps at 4.39%.
    BOE plans to sell gilts next week,

    BOE chief economist Pill says:
    We will not sell gilts into a dysfuncational market
    As long as market is orderly, repricing of fundamentals can continue
    We are not running faster than anywhere else in reducing our balance sheet, but process is different

    UK 10s are still near the highs of the day, up 13 bps to 4.39%.
    The UK press is noting that’s higher than Greece and Italy as the pressure ramps up on Kwarteng.


    Bank of England announced a plan to conduct temporary purchases of longer-dated gilts “to restore orderly market conditions.” The announcement gave a brief boost to the pound, but the move was retraced entirely, sending Sterling to a fresh session low.

    BOE will buy bonds with +20-year maturity starting today
    Up to GBP5 billion per action initially
    Parameters under review (sizes could be changed)
    First auction today between 1400-1430 GMT (3:30 pm in London, 1030 am in NY)
    UK yields have fallen since the details were announced a few minutes ago and GBP has strengthened and reversed

    The combination of today’s QE from the Bank of England and Kwarteng’s promises to bankers to put the UK on a path to medium term fiscal stability appear to have done the trick.

    UK 30-year yields are at a new session low at 4.15%.

    Bloomberg reports that it was collateral calls and warnings of contagion that prompted the move.

    The Bank had been warned by investment banks and fund managers in recent days that the collateral requirements could create a situation in which forced selling drove up the yield on UK debt, the person said, asking not to be named discussing the central bank’s deliberations.


    The BOE had been warned there would be more forced selling this afternoon, that’s why we’re getting today’s hastily arranged QE action.

    UK 30-year yields are down to 4.09% from a high of 5.09% earlier. That’s a hefty profit for anyone who bought three hours ago.


    Bank of England expanded its emergency bond buying scheme to include index-linked Gilts. The program remains on track to end on Friday, though the U.K.’s Pension and Lifetime Savings Association called on the Bank of England to continue the program until at least the end of the month.

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