I had been writing about the collapse of bond prices and I will continue to expand my series of posts explaining how to research this market as it becomes cheaper and, as I had I thought , hopefully ‘normalises’.
However, I like everyone else (except perhaps the scribblers at the Daily Mail?) have been truly astonished by the ‘not a budget but still called a mini-budget by everyone’ announced by Mr Kwarting.
There had, in the run up, been suggestions by fixed income market dealers that the expected cost of energy price subsidies would strain the gilt market if the associated levels of extra government borrowing were added to the flow of stock into the market from quantative ‘tightening’. But even those pessimists will have been taken aback by the potential impact of what was announced.
But is it just a cunning plan? Maybe the Chancellor knew that Sterling would bomb (he ought to have done) and thinks that will make British Government debt so cheap that overseas (and maybe a few home) investors will buy it up by the truckload? It might well work, if discounts get big enough to make interest payment in feeble Pounds come at a high enough yield to beat those in strong Dollars.
Personally, I think he and his colleagues are backing the theories of a small number of discredited (some 40 years back) academics who have never worked outside of a university. That is a huge gamble.
Now is, disappointingly, not the time to be buying Sterling assets unless you are very brave. They could end up even cheaper. Is it not odd the the UK government has made it that way? Expect some takeover announcements before long as the private equity vultures go scavenging.
