Pegasus Capital

With the UK in recession, the continued threat from the Euro region and the USA still sluggish, it is no surprise that interest rate rise expectations have all but disappeared in the near term.

Both LIBOR rates (out to 1 year) and Fixed Term rates (longer than 1 year) were lower. A comparison of the implied forward curve for SONIA (the closest market benchmark to the UK Base Rate) shows that the markets view for possibility of a cut in the Base Rate by another 25bp  has increased in the near-term and that Base Rates over 1% will come in mid 2016 rather than the end of 2015 predicted at the end of last month.

UK Government  Bond yields tightened in as the Bank Of England continued it’s Quantitative Easing programme and International Investors continued buying UK Gilts in preference to Euro Sovereign Debt. The 10 year UK Gilt Benchmark closed at a yield of 1.4850%  (1.7340%) and the 30 year UK Gilt Benchmark closed at a yield of 2.8860% (3.0380%).

In the Foreign Exchange Market GBP was pretty much unchanged against the USD$ at 1.5650 (1.5707) , but stronger against the EURO at 1.2740 (1.2401)

In the credit markets the UK Banks performance was varied, with RBS, Lloyds, Nationwide and Santander UK credit spreads (risk) all tighter (less), but Barclays and HSBC both slightly wider (increased risk).

Tags: Recession

PegasusCapital - Wed 1st Aug

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A View from the Bridge - Aug 2018

The Bank of England has raised interest rates above 0.5% for the first time since March 2009, although this is still the first-time rates have been set at 0.75%, base rates were cut from 1% to 0.5% as part of the ongoing emergency response to the financial crisis. The 0.25% increase follows the removal in November of the emergency cut to 0.25% delivered in the aftermath of the Brexit vote.

PegasusCapital - Mon 6th Aug