Bank of England poised to raise rates by most in 33 years

[odysseus2000]

This heavy holding of gilts led to the near collapse of the pension industry:

No it didn't. Nor did it lead to the near bankruptcy of the Banking industry as you previously claimed.

This was the description put on events by the boe as out lined inr guardian article:

https://www.theguardian.com/business/20 ... t-meltdown

Had the Bank not intervened with a promise to buy up to £65bn of government debt, funds managing money on behalf of pensioners across the country “would have been left with negative net asset value” and cash demands they could not have met.

“As a result, it was likely that these funds would have to begin the process of winding up the following morning,” the Bank said.

The central bank said the meltdown was at risk of rippling through the UK financial system, which could have then caused “excessive and sudden tightening of financing conditions for the real economy”.

Are you saying this is all boe propaganda & didn’t happen or what?

Regards,

Just because it is in the Guardian doesn't make it true. I worked alongside the pensions industry (and the Bank of England) for many years. I would postulate I know more about this situation than the average person, and posters here too.

This isn't "propaganda". It is closer to media misunderstanding and hyperbole. The BoE only intervened to provide orderly markets in securities over which it had a regulatory responsibility. In the end actual interventions were very small. Far from your claimed "negative net asset value " (whatever that means!) most pension funds exited the recent disorderly period in the interest rate markets with improved balance sheets representing lower deficits.

So your argument is that it was all a hoax perpetrated for unknown reasons by various factions at the boe, media etc.

An interesting perspective, thank you for sharing.

Regards,

[dealtn]

This heavy holding of gilts led to the near collapse of the pension industry:

No it didn't. Nor did it lead to the near bankruptcy of the Banking industry as you previously claimed.

This was the description put on events by the boe as out lined inr guardian article:

https://www.theguardian.com/business/20 ... t-meltdown

Had the Bank not intervened with a promise to buy up to £65bn of government debt, funds managing money on behalf of pensioners across the country “would have been left with negative net asset value” and cash demands they could not have met.

“As a result, it was likely that these funds would have to begin the process of winding up the following morning,” the Bank said.

The central bank said the meltdown was at risk of rippling through the UK financial system, which could have then caused “excessive and sudden tightening of financing conditions for the real economy”.

Are you saying this is all boe propaganda & didn’t happen or what?

Regards,

Just because it is in the Guardian doesn't make it true. I worked alongside the pensions industry (and the Bank of England) for many years. I would postulate I know more about this situation than the average person, and posters here too.

This isn't "propaganda". It is closer to media misunderstanding and hyperbole. The BoE only intervened to provide orderly markets in securities over which it had a regulatory responsibility. In the end actual interventions were very small. Far from your claimed "negative net asset value " (whatever that means!) most pension funds exited the recent disorderly period in the interest rate markets with improved balance sheets representing lower deficits.

So your argument is that it was all a hoax perpetrated for unknown reasons by various factions at the boe, media etc.

An interesting perspective, thank you for sharing.

Regards,

I assume you can actually read. In which case do you wish to reconsider and make a more thought out response rather than ascribe an interpretation or perspective to me I don't hold?

What do you claim I think is a hoax? (What is the "it" in your sentence?). If your "it" is your claim that the banking industry came close to collapse - then I think it is untrue. If your "it" is a claim that the pension industry would have been left with "negative net asset value" then that is also untrue.

I see no hoax here, nor any of the BoE or media perpetrating one. As I have said I see a lot of poor knowledge on what went on in the financial markets and pensions industry in the last month (and preceding decades too to be fair) and the knowledge of its current position and future is equally ill-informed and opaque.

[odysseus2000]

dealtn

I assume you can actually read. In which case do you wish to reconsider and make a more thought out response rather than ascribe an interpretation or perspective to me I don't hold?

What do you claim I think is a hoax? (What is the "it" in your sentence?). If your "it" is your claim that the banking industry came close to collapse - then I think it is untrue. If your "it" is a claim that the pension industry would have been left with "negative net asset value" then that is also untrue.

I see no hoax here, nor any of the BoE or media perpetrating one. As I have said I see a lot of poor knowledge on what went on in the financial markets and pensions industry in the last month (and preceding decades too to be fair) and the knowledge of its current position and future is equally ill-informed and opaque

Yes, but it is the media who set the agenda & it was the media & the politicians who brought down Truss.

What ever is the right interpretation never matters, it is what carries events that is important to investors/traders.

The narrative put out brought down Truss and installed Sunak & led to a reversal of all the policies of her chancellor.

Whether that narrative was a falsehood or not, it was what carried the day for the interests that promoted it.

As far as I know no one in that discussion came to the Lemon or anywhere else & got some different ideas and tried to save Truss.

The narrative is now set in the history books and Sunak is Prime Minister. We can say it should not be, that Sunak was elected on lies, but who cares?

Regards,

[ursaminortaur]

dealtn

I assume you can actually read. In which case do you wish to reconsider and make a more thought out response rather than ascribe an interpretation or perspective to me I don't hold?

What do you claim I think is a hoax? (What is the "it" in your sentence?). If your "it" is your claim that the banking industry came close to collapse - then I think it is untrue. If your "it" is a claim that the pension industry would have been left with "negative net asset value" then that is also untrue.

I see no hoax here, nor any of the BoE or media perpetrating one. As I have said I see a lot of poor knowledge on what went on in the financial markets and pensions industry in the last month (and preceding decades too to be fair) and the knowledge of its current position and future is equally ill-informed and opaque

Yes, but it is the media who set the agenda & it was the media & the politicians who brought down Truss.

What ever is the right interpretation never matters, it is what carries events that is important to investors/traders.

The narrative put out brought down Truss and installed Sunak & led to a reversal of all the policies of her chancellor.

Whether that narrative was a falsehood or not, it was what carried the day for the interests that promoted it.

As far as I know no one in that discussion came to the Lemon or anywhere else & got some different ideas and tried to save Truss.

The narrative is now set in the history books and Sunak is Prime Minister. We can say it should not be, that Sunak was elected on lies, but who cares?

Regards,

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction.

[odysseus2000]

ursaminotaur

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

[ursaminortaur]

ursaminotaur

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

As I recall the market reaction was pretty much immediate straight after the mini-budget without there being much time for the media to construct a narrative. In particular the removal of the 45% top rate and the lack of a report from the OBR came as a surprise to both the media and the market and the market reacted to that surprise.

[Nimrod103]

ursaminotaur

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

As I recall the market reaction was pretty much immediate straight after the mini-budget without there being much time for the media to construct a narrative. In particular the removal of the 45% top rate and the lack of a report from the OBR came as a surprise to both the media and the market and the market reacted to that surprise.

But the abolition of the 45 % rate would have had very little cost impact, and indeed many predictions suggested that the tax take would grow. Clearly markets hugely over-reacted to a minor change. All very strange.

[servodude]

ursaminotaur

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

As I recall the market reaction was pretty much immediate straight after the mini-budget without there being much time for the media to construct a narrative. In particular the removal of the 45% top rate and the lack of a report from the OBR came as a surprise to both the media and the market and the market reacted to that surprise.

But the abolition of the 45 % rate would have had very little cost impact, and indeed many predictions suggested that the tax take would grow. Clearly markets hugely over-reacted to a minor change. All very strange.

surely the reaction was more about the fact that those presenting the mini-budget were signalling their lack of credibility (not least by trying to avoid any review of their "plan")

[Nimrod103]

ursaminotaur

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

As I recall the market reaction was pretty much immediate straight after the mini-budget without there being much time for the media to construct a narrative. In particular the removal of the 45% top rate and the lack of a report from the OBR came as a surprise to both the media and the market and the market reacted to that surprise.

But the abolition of the 45 % rate would have had very little cost impact, and indeed many predictions suggested that the tax take would grow. Clearly markets hugely over-reacted to a minor change. All very strange.

surely the reaction was more about the fact that those presenting the mini-budget were signalling their lack of credibility (not least by trying to avoid any review of their "plan")

Urs said 'In particular the removal of the 45% top rate and the lack of a report from the OBR', caused the collapse of the Truss budget, when clearly these factors were of minor effect.
Does it not worry you that the media and Tory politicians are putting the blame for the current economic black hole on the Truss administration, when it was only in power for 45 days, and enacted almost no legislation or tax changes? And yet the real culprits of the catastrophe are now the Prime Minister and the (continuing) head of the BoE.

[ursaminortaur]

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

As I recall the market reaction was pretty much immediate straight after the mini-budget without there being much time for the media to construct a narrative. In particular the removal of the 45% top rate and the lack of a report from the OBR came as a surprise to both the media and the market and the market reacted to that surprise.

But the abolition of the 45 % rate would have had very little cost impact, and indeed many predictions suggested that the tax take would grow. Clearly markets hugely over-reacted to a minor change. All very strange.

surely the reaction was more about the fact that those presenting the mini-budget were signalling their lack of credibility (not least by trying to avoid any review of their "plan")

Urs said 'In particular the removal of the 45% top rate and the lack of a report from the OBR', caused the collapse of the Truss budget, when clearly these factors were of minor effect.
Does it not worry you that the media and Tory politicians are putting the blame for the current economic black hole on the Truss administration, when it was only in power for 45 days, and enacted almost no legislation or tax changes? And yet the real culprits of the catastrophe are now the Prime Minister and the (continuing) head of the BoE.

Actually all I said was that those measures came as a surprise to the media and markets. However the removal of the 45% top rate in the midst of a cost of living crisis pointed up the political insensitivity of the government and the lack of any figures from the OBR undermined the credibility of the whole package.

[GoSeigen]

I assume you can actually read. In which case do you wish to reconsider and make a more thought out response rather than ascribe an interpretation or perspective to me I don't hold?

The fella has a PhD. Why should he have to read or think or comprehend what we write?

GS

[dealtn]

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

If you are referring to me at least have the courtesy to quote me so it can be brought to my attention. The use of (accurate) quotes would also show this isn't my view, nor what was said.

You are guilty of making grand statements using words such as "all" and "none" and then failing to back them up when challenged - before moving on to similar disingenuous claims which in turn are challenged in debate, and on we go.

[88V8]

Who'd be a historian, eh?
Even a few weeks after the event intelligent people can't agree the how the what of a major public episode.

V8

[scotview]

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.


But the abolition of the 45 % rate would have had very little cost impact,

What I am finding difficulty with is why a Truss £40B budget can have such a severe market reaction and "need" to raise taxes & austerity, whereas a Sunak £600B unfunded pandemic spend goes by like it is invisble to markets/BoE/Treasury.

Something doesn't ring true, or am I just naive.

[Dod101]

ursaminotaur

Surely what brought down Truss was the market reaction to the mini-budget. The media just reported on that reaction

Yes, but was the market reaction to the mini budget a manipulation of information or a true reaction.

The explanation put forward by the media was that pension funds were getting margin calls as the price of gilts fell & gilts had been used as collateral in various derivative trades. This was then endangering the entire uk financial system & needed large interventions by the boe.

How much of this happened is the subject of debate. I am not in that field but a poster says none of this was real & the media & market reaction were false as best as I understand the argument presented.

I have no idea. I just know that Truss was cast out & Sunak installed & that the media narrative will go into the history books.

Regards,

I am so glad that you recognise that you 'have no idea'.

Dod

[Dod101]

What I am finding difficulty with is why a Truss £40B budget can have such a severe market reaction and "need" to raise taxes & austerity, whereas a Sunak £600B unfunded pandemic spend goes by like it is invisble to markets/BoE/Treasury.

Something doesn't ring true, or am I just naive.

I think the difference is that Sunak's giveaway was accepted for what it was, a reasonable and necessary move in the midst of a pandemic lockdown. We can argue for ever whether the lockdown was necessary and whether the financial measures of support were the best way of going about supporting the economy but at the time, they were considered necessary and welcomed at the time.

What Truss and her Chancellor did was make an entirely voluntary and unforced move to significantly cut taxes when we already had a deficit in our income and expenditure, inflation was rising rapidly and so were interest rates. Not only that, but Kwarteng added, for good measure, 'and there is more to come'. Is it any wonder that the markets went into panic mode? The media simply reported that.

Dod

[PeterGray]

What Truss and her Chancellor did was make an entirely voluntary and unforced move to significantly cut taxes when we already had a deficit in our income and expenditure, inflation was rising rapidly and so were interest rates. Not only that, but Kwarteng added, for good measure, 'and there is more to come'. Is it any wonder that the markets went into panic mode? The media simply reported that.

I'd agree with that, but go further.

The decisons were taken against a background of the sacking of the long term permanent sec to the Treasury, a refusal to follow standard procedure and commission an OBR report, and so to present the moves with no modelling of the results, just unsupported claims of "growth. And no details of the supply side changes to be provided for nearly 2 months.

Pretty much guaranteed to cause loss of market confidence and panic.

[Dod101]

What Truss and her Chancellor did was make an entirely voluntary and unforced move to significantly cut taxes when we already had a deficit in our income and expenditure, inflation was rising rapidly and so were interest rates. Not only that, but Kwarteng added, for good measure, 'and there is more to come'. Is it any wonder that the markets went into panic mode? The media simply reported that.

I'd agree with that, but go further.

The decisons were taken against a background of the sacking of the long term permanent sec to the Treasury, a refusal to follow standard procedure and commission an OBR report, and so to present the moves with no modelling of the results, just unsupported claims of "growth. And no details of the supply side changes to be provided for nearly 2 months.

Pretty much guaranteed to cause loss of market confidence and panic.

Thanks. I agree they were all factors that made bad decisions far worse, and showed the arrogance and/or naivety of the two architects of the moves.

Dod

[tjh290633]

What Truss and her Chancellor did was make an entirely voluntary and unforced move to significantly cut taxes when we already had a deficit in our income and expenditure, inflation was rising rapidly and so were interest rates. Not only that, but Kwarteng added, for good measure, 'and there is more to come'. Is it any wonder that the markets went into panic mode? The media simply reported that.

Dod

I still maintain that the cause of the reaction to the Kwarteng budget was the absolute failure of the Bank of England to do anything the previous day, when the market had been expecting a 1% increase in Base Rate. They are still havering about what to next.

TJH

[AsleepInYorkshire]

US interest rates rise to fresh 14-year high

The Federal Reserve said it was raising its key interest rate by 0.75 percentage points, lifting it to its highest rate since early 2008.

Eww. I suspect this will ultimately have an impact upon UK interest rates.

AiY(D)