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gruffydd

What's Brown Up To

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Hrm, regulatory demands on pension funds have driven bond prices to silly prices so yields have plunged to barely 0.5% above inflation. Brown can increase supply of bonds but ultimately that means he will have to pay more to borrow, also if bond prices fall this will stuff the pension funds yet again as the capital falls will not be offset by the coupon.

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I don't really get it. Why don't they just borrow the money from Japan at 1%? Everyone else seems to.

Because of the currency risk, when the British government can borrow off the bond markets for 0.5% above inflation it's not even worth the hedge.

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Because of the currency risk, when the British government can borrow off the bond markets for 0.5% above inflation it's not even worth the hedge.

Remember thats Browns measure of inflation - the CPI - which ignores many price rises (council taxes etc..) If you think about it - In real terms the pension funds are actually losing value in these bonds over 50 years. When Brown 'meets demand' its the ultimate stealth tax, used to expand government further (the costs of which are not in the inflation measure!) .... and so on...!

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Remember thats Browns measure of inflation - the CPI - which ignores many price rises (council taxes etc..) If you think about it - In real terms the pension funds are actually losing value in these bonds over 50 years. When Brown 'meets demand' its the ultimate stealth tax, used to expand government further (the costs of which are not in the inflation measure!) .... and so on...!

Indeed, and they're equally stuffed if he issues new gilts and the price slackens (therefore yields go up), this will leave funds nursing losses on the bond. It's akin to the following :-

"So your BTL flat is worth £30k less than you paid for it, at least there's some good news, using the new valuation your yield just shot up!"

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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