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Realistbear

F.t.: G3 Countries All Draining Liquidity

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http://news.ft.com/cms/s/83e7f5ae-c283-11d...20abe49a01.html

Interest rate outlook sustains bond sell-off

By Joanna Chung in London and Jennifer Hughes in New York

Published: April 2 2006 21:08 | Last updated: April 2 2006 21:08

Strengthening expectations that global interest rates will rise threaten to prolong a sharp sell-off in the major government bond markets.

Forecasts that rates will rise faster and further than expected sent bonds sharply lower last week and yields surging. The 10-year US Treasury saw the worst weekly loss in five months and is now yielding 4.853 per cent, the highest level since the Federal Reserve started raising rates in June 2004.
The yield on the 10-year German Bund is near 15-month peaks at 3.774 per cent, the UK-gilt is yielding 4.383 per cent, the highest since last November, and 10-year Japanese government bonds are yielding 1.765 per cent, the highest in 19 months.
Some observers think yields will rise as central banks continue to tighten. It is the first time since the 1980s that central banks in the
“G3” – the US, the eurozone, or its previous equivalent, and Japan – are all draining excess liquidity from the global financial system
.
There has been a
dramatic shift in interest rate expectations
since the beginning of the year.
Denis Gould, head of fixed income at Axa Investment Managers, said: “The Japanese are going to raise rates at some point.
In the UK, it’s less certain but it looks like there’s a 50-50 chance the next move will be up.

It appears unrealistic to think that Gordon "Miracle Economy" Brown can sustain HPI with low IR for much longer with the G3 (and most other world economies) raising rates rapidly. A long and sustained HPC cannot be put off forever and Gordon has as much hope at keeping the IR tide from coming in as Canute had in keeping the beaches dry in his day.

Edited by Realistbear

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Good. I hope rates continue to rise internationally. The BoE will only raise when forced to, IMO.

Isn't it interesting that we're the only country not tightening? What does that tell you about what is at stake in the farcical British housing market and it's associated potemkin economy?

As far as I'm concerned, it's a win-win situation for all FTBs and also my parents who are retired and have paid off their mortgage. Not only will house prices fall, we will both share in better interest rates on our hard-earned savings.

Oh - and should a recession leave me without employment - I have a good savings cushion to fall back on. How many other people can say that?

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I see strong arguments for interest rates to rise in the UK. As you point out RealistBear, Gordon Brown would have great difficulty stemming the tide if the rest of the world is raising rates.

But a devil's advocate position might be that you assume that the government/Brown will have to raise rates or risk &*£(ing the whole country. I'm not convinced that the government isn't prepared to let the country go to the financial dogs rather than admit that they were wrong.

As a devil's advocate argument, I could say look at Iraq, which Blair still seems to claim that Iraq wasn't a mistake. [Though in reality I'm not sure that Iraq was a mistake, just that the public reasons given for the war weren't the real reasons].

Billy Shears

Edited by BillyShears

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QUOTE
Steven Major, head of fixed income strategy at HSBC, said: “The considered view is that we are getting to the top of the rate cycle and if that is the case, you do not want to be too bearish on bonds.”

Japan and the ECB have only just BEGUN to raise the rates--the VIs who say we are at the top of the cycle could not be further from the truth.

Edited by Realistbear

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Billy,

They can say what they like about Iraq. All they have done is ravaged the country. 23 billion by the US and the Brits are well in there too. We should be ashamed of ourselves. But back to the point- Who in Iraq is going to say anything? There is no one there, who is not on the take, with a voice!

Back to the situation here.As pig headed and self serving as this "government" is it can not sit and watch the pound tank.I deal with a lot of foriegn investors who come to the UK and some actually live here. Believe me when I tell you this, the single reason why they are here is purely for the strength if the currency and what a pound buys abroad. Lose that and there is absolutely no reason for them or their money to be here, they actually joke that the strength of the pound is the last jewel of the empire.

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QUOTE
Steven Major, head of fixed income strategy at HSBC, said: “The considered view is that we are getting to the top of the rate cycle and if that is the case, you do not want to be too bearish on bonds.”

Japan and the ECB have only just BEGUN to raise the rates--the VIs who say we are at the top of the cycle could not be further from the truth.

I believe that comment relates to America. Also, any rise in Japan will be massive in % terms from here, so I wouldn't expect large movements.

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Nobody would expect big moves from the BOJ. But then again they only need to move by 3/4% to create havoc!

My vested interest aside I can easily see that happening.

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They can say what they like about Iraq. All they have done is ravaged the country. 23 billion by the US and the Brits are well in there too. We should be ashamed of ourselves. But back to the point- Who in Iraq is going to say anything? There is no one there, who is not on the take, with a voice!

Getting off topic, but I think that the US wanted to ravage the country. Destroy it, keep it weak, and steal the oil.

Billy Shears

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I won't go one about this either but I think its true of the whole region, Iran next etc.

It is West V East.

Still I think on balance it's probably better to live the American dream and watch them take over the world rather than end up being regarded as infidels and having a religion forced on us.

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The BofE stopped raising and effectively found the pain barrier of the economy by dropping a quarter point. They found a balancing point so that they could then afford to wait and blame anything else on the global challenge as Brown like to put it.

They are reactive rather than proactive in their decisions.

Slowly the cut rates brigade have vanished. At the moment all media articles are refusing to mention any possibility of rate increases but that could begin to change quite quickly.

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wow. easy. this is the late shift. we dont do complex sums. were mostly drunks and angry young men. or young-ish. come back tomrrow when the serious broker types come on board.

anyone want to play cards ?

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I have thought for ages that the bond markets have grossly underestimated the risk of inflation in the medium to long term...They've written it off completely ....This is why long term fixes are available at rates barely above today's variable rate......

and why i don't understand why people like TTRTR (and indeed most mortgaged people) are so keen on variable rates and so averse to long term fixes.....

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I have thought for ages that the bond markets have grossly underestimated the risk of inflation in the medium to long term...They've written it off completely .

It's easy to write off future inflation when you're borrowing trillions of yen at 0.25% in Japan and buying Icelandic bonds paying 8%. As the carry trade dies off, bonds will have to return to paying sensible rates.

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  • 301 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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