Thursday, February 21, 2013

Here yo go!

Global banks shun UK Gilts on 'stagflation' risk

A clutch of global banks and funds have warned clients to steer clear of UK Gilts, fearing that the Bank of England has opened the door to “stagflation” and risks losing credibility. Rene Defossez from France’s Natixis said Britain looks vulnerable on multiple fronts, not helped by talk of European Union exit. Public debt will reach 110pc of GDP by 2016. The current account deficit is deteriorating. The country is stuck in a vicious circle as a high “fiscal multiplier” prevents budget cuts from making a dent on the deficit.

Posted by khards @ 08:22 AM (4461 views)
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5 thoughts on “Here yo go!

  • “fearing that the Bank of England has opened the door to stagflation”

    Have we not had stagflation since 2007?

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  • As far as I’m concerned, this cannot happen soon enough….but what will UK government do to keep interest rates down? That’s the question!

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  • They keep on talking about a bond collapse but what is the effect on the man on the street? will this mean higher interest rates? will the banks have to raise interest rates despite what the government wants to avoid another bank bust?

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  • Not sure i’m on board with this stagflation risk. I think global banks make up a rather small holding (as a percentage) of uk gilts. So i’m a little sceptical about an imminent stagflation risk because a clutch of global banks are shunning the gilts. I believe it is foreign governments like china who are have the biggest holdings, and it is most likley not in there interest to sell?

    Hope it happens mind.. Praying for a HPC just can’t see anything other than ‘real terms’ price drops on the horizon

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  • I think this is a minor correction before the pound rises once more vs the Euro. It is well known by economists everywhere, that Britain is far better placed to resolve regional economic discrepancies than is the Eurozone as a result of hundreds of years of economic and political integration.

    We do not need to set up bailout mechanisms for Wales and Scotland because we already went through that process. Europe still has to make the full adjustment if that adjustment does not rip it apart, and that will be reflected eventually in the value of the Euro, which will fall relative to Sterling in the long-run.

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